Following strong operating results and an enhanced guidance by management, we have upgraded natural gas producer and pipeline firm The Williams Companies Inc. (WMB) to Outperform from Neutral.

Williams Companies 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 four segments: Exploration & Production, Williams Partners – that includes the company’s 84%-owned master limited partnership Williams Partners L.P. (WPZ) – Midstream Canada & Olefins, 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 just-concluded consolidation program will allow Williams to simplify its structure, pay down debt, drive growth and unlock value for shareholders.

Furthermore, the company’s proposal to split into two separate entities is expected to be long-term accretive. Higher natural gas liquids (NGL)/oil prices and improved olefin margins add to the positive sentiment.

In the recently reported first quarter results, Williams Companies came up with better-than-expected numbers, reflecting positive production figures, strong contributions from gas pipeline business, and higher per-unit ethylene/propylene margins.

Earnings per share, excluding special items, came in at 36 cents, beating the Zacks Consensus Estimate by a penny and at par with year-ago quarter’s results.

As such, we believe Williams is well positioned going forward and view it as an attractive investment. Our long-term Outperform recommendation is supported by a Zacks #1 Rank (short-term Strong Buy rating).

WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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