ET - Energy Transfer: Another Base Hit

2024-03-26 15:41:05 ET

Summary

• Energy Transfer is facing disputes and legal battles with Williams Companies. Management needs to avoid this type of situation in the future.
• The ongoing litigation is causing a cash drain for Energy Transfer and could lead to costly outcomes. Even with the current "win", this is a very risky strategy.
• Accruals for contingent obligations are increasing, indicating potential future expenses for the company.
• Any company that "hits a lot of singles and doubles" could hit a home run. In the legal area, investors do not want this type of home run.
• Management still has a lot of cleaning up to do. The company needs to get away from going to court as much as it does.

I have long maintained that companies that tend to hit "home runs" are the companies that hit a lot of singles and doubles. Energy Transfer ( ET ) just keeps those legal single and doubles coming. This time around, Energy Transfer appears to be prevailing. But it is not something that you want to keep doing because sooner or later there could be a costly mistake that shareholders pay for. It is the homerun you want to avoid as management....

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