On the one hand, Energy Transfer (ET -0.92%) is having a fantastic year. The energy company has produced record-setting results as earnings and cash flow have surged more than 30% year over year through the second quarter. Meanwhile, it added more fuel to continue growing at a fast pace by agreeing to acquire SemGroup (SEMG) for $5 billion.

However, despite all that good news, units of the MLP have declined by about 2% this year. That underperformance is a real head-scratcher, as Energy Transfer has pushed up its yield to nearly 10% and its valuation down to a stupid-cheap level. Hopefully, the market will begin to rethink its view on Energy Transfer after getting another look at its performance when the company unveils its third-quarter results later this week. Here's what to watch in that report.

Oil pipelines over a sunset.

Image source: Getty Images.

See if it remains on track with its updated outlook

Energy Transfer initially anticipated that it would produce between $10.6 billion and $10.8 billion of adjusted EBITDA this year. However, thanks to its strong showing through the first half, it bumped up that range to $10.8 billion to $11 billion. That implies 14.6% year-over-year growth at the midpoint of its range, which is impressive for such a large pipeline company.

Hopefully, Energy Transfer's third-quarter results will confirm that it's still on pace with its updated outlook. One area to watch is if persistently weak natural gas prices are having any notable impact on volumes. Several gas drillers are slowing their pace, which could impact the flow of gas on its systems.

Keep an eye on its growth projects

Energy Transfer had planned to spend about $5 billion on expansion projects this year. However, it reduced its expected investment level to a range of $4.6 billion to $4.8 billion. That's due in part to the decision not to move forward with a large oil pipeline project.

The company, however, noted that it had several other opportunities in development. One that it's most excited about is an expansion of its Bakken pipeline system. That project would nearly double the system's capacity by adding new pumping stations, making it a low-cost, high-return opportunity.

Ideally, the pipeline company will report continued progress on securing new projects during the quarter. That would give it the fuel to continue growing at a fast pace in the coming years.

Look for more progress on improving its financial profile

The SemGroup deal came as quite a surprise to investors because Energy Transfer's focus had been on improving its balance sheet. While that deal won't negatively impact its credit metrics, it won't enhance them, either. Because of that, the company's units have fallen about 4% since it announced the deal due to the market's view that it's a departure from its promised plan of quickly improving its financial profile.

Energy Transfer, however, could announce some balance sheet improvement steps along with its third-quarter results. The company has, for example, reportedly been working on selling its 33% stake in the Rover Pipeline. According to a Reuters' report, Italy's Snam has emerged as a leading bidder for the $6 billion pipeline system. An announcement of the sale of this or other noncore assets would help ease investors' concerns that the SemGroup acquisition is a step backward.

Investors should also look for any hint at what Energy Transfer might do with SemGroup's Canadian assets. Energy Transfer doesn't currently have a presence in that country. Further, many of its peers have exited Canada due to an increasingly unfavorable environment. As such, Energy Transfer could look to sell those assets to help accelerate its balance sheet improvement plan.

Keeping an eye out for more good news

Energy Transfer is on track for a strong year financially, which will hopefully remain the case after its third-quarter results. It would also be nice to see the company make more progress on securing new expansion projects while also further shoring up its financial profile. If it can do all that, then the MLP's unit price might finally break out of its doldrums.