Williams Partners Got Upgrade after Financial Repositioning


Nov. 20 2020, Updated 12:50 p.m. ET

Williams Partners’ ratings update

Williams Partners (WPZ) was upgraded by Raymond James from “market perform” to “strong buy” last week. It came after its announcement that it would be removing IDRs (incentive distribution rights), distribution cuts, and other measures, collectively called financial repositioning.

At the same time, Williams Companies (WMB), WPZ’s midstream C corporation GP (general partner), was downgraded by Jefferies from a “buy” to a “hold.” That could be attributed to WMB’s dependence on WPZ for distribution income.

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WPZ’s stock performance

Williams Partners (WPZ) rose 36.6% in 2016 and had a strong start to 2017. In comparison, its peers Energy Transfer Partners (ETP) and Enterprise Product Partners (EPD) rose 6.1% and 5.7%, respectively, in 2016.

WPZ is currently trading at an analyst estimated forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 10.8x. That’s lower than the peer median multiple of 12.1x.

WPZ’s average target price of $41.10 implies a 1.5% price return from its January 13, 2017, closing price of $40.50.

WPZ’s outlook

Williams Partners (WPZ) looks attractive from a long-term perspective due to its natural gas growth strategy and recent measures to delever its balance sheet, including the sale of commodity-exposed non-core businesses. WPZ is expected to benefit from expected strong natural gas supply growth in the Northeast region and expected strong natural gas demand growth through its Transco expansion projects.

Transco is one of the largest natural gas pipeline networks in the United States. The pipeline recently delivered record natural gas volumes in January 2017 due to a high winter demand.

According to the related press release, “Transco delivered a record-breaking 13.7 million dekatherms (MMdt) on Jan. 8. The new peak-day mark surpasses the previous high of 13.5 MMdt that was set on Jan. 7, 2015.”


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