Shares of The Williams Companies Inc. (WMB) hit a 52-week high of $31.89 on Friday, April 1. The natural gas producer and pipeline firm has seen its share price climb approximately 72% since the end of August last year, as investors have been buying the stock for its attractive fundamentals and positive outlook. The turnaround in fuel prices amid recent optimism about economic recovery has added to this bullish sentiment.
Williams Companies – currently having a Zacks #1 Rank (short-term Strong Buy rating) in the short run – is an integrated energy firm that primarily finds, produces, gathers, processes and transports natural gas primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania. The company divides its business into three segments: Exploration & Production, Williams Partners – that includes the company’s 84%-owned master limited partnership Williams Partners L.P. (WPZ) – and Other.
We like the company’s strong business mix, attractive growth opportunities in its low-risk upstream model and relatively stable fee-based midstream services. We also think that the recently concluded $12 billion consolidation program will allow Williams to simplify its structure, pay down debt, drive growth and unlock value for its shareholders.
Furthermore, the company’s proposal to split into two separate entities is expected to be long-term accretive. This will allow both of them to pursue great opportunities in their respective market segments and better serve the needs of both investor groups without the constraints of the parent company.
We are particularly bullish on Williams’ midstream and pipeline sectors and expect growing cash flows from these assets. The company is poised to benefit from the rebound in industrial activity that will see increased natural gas demand in the form of natural gas liquids.
As such, in the short-term, we believe Williams Companies is well positioned going forward and view it as an attractive investment.
WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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