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Williams Companies’ Analysts Are Leaning This Way as of July 11

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Analyst ratings for Williams Companies

As of July 11, 2017, 65% of analysts surveyed by Reuters are rating Williams Companies (WMB) a “buy,” while the remaining 35.0% are rating it a “hold.” Williams has two new coverage analysts and has seen three rating upgrades since the beginning of this year. The C corporation was last upgraded by Wells Fargo to “buy” in May 2017.

By comparison, peers Enbridge (ENB) and Kinder Morgan (KMI) have “buy” ratings from 53.8% and 68.2% of analysts, respectively, while 65% of analysts rate Williams Partners (WPZ) a “buy.”

WMB’s average target price of $33.4 implies a 9.8% price return from its closing price of $30.4 on July 11, 2017.

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Outlook for WMB

WMB’s outlook depends upon WPZ’s ability to grow its distributable cash flows and distributions. Below are few positive outlook points for the Williams franchise:

  • resilient drilling activity in the Marcellus and Utica regions, despite the recent weakness in natural gas prices
  • current US government plans to achieve energy dominance through higher natural gas exports, which is expected to benefit Williams’ long-term contracts, including four of six LNG (liquefied natural gas) projects
  • the decline in commodity price exposure through the successful completion of sales of assets linked to commodity prices

Below are few negative outlook points for the WMB franchise:

  • leverage expected to stay above the industry standard by the end of 2017, despite the company’s recent measure to strengthen its balance sheet
  • targeted debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple of less than 5.25x by the end of this year
  • IDR (incentive distribution rights) removal from capital structure to negatively impact cash flows

For more coverage on midstream companies, be sure to check out Market Realist’s Master Limited Partnerships page.

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