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Williams Companies Poised for Growth Despite High Debt


We issued an updated research report on Oil and Gas Production and Pipeline firm The Williams Companies Inc. WMB on Jan 12, 2017.

Williams is well positioned to take advantage of the nation's natural gas supply growth. The company’s large-scale value-creating projects position it for strong returns even in a low commodity price environment. However, Williams’ high debt level is a matter of concern.

As a result, Williams currently has a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Williams Companies’ midstream assets, which are less sensitive to commodity prices, should help the company maintain a steady stream of revenues and cash flows even if natural gas prices remain low.

Moreover, William Companies recently increased its quarterly dividend by 50% and has announced plans to raise its stake in the Williams Partners subsidiary to 72%. This is expected to position the company for long-term, sustainable growth as well as solidify investment-grade credit ratings of its subsidiary.

Williams Companies, Inc. (The) Price and Consensus

Additionally, growth prospects for energy infrastructure all across North America appear bright due to the increasing need to support producers in the growth of shale plays, especially in regions where there is a severe lack of facilities. This creates exciting opportunities for a pipeline firm like Williams, as it looks to capture the economic benefit of this trend.

However, the ongoing weakness in commodity prices has taken a toll on the volume and distribution growth potential at Williams Partners, the company's largest income generating business segment.

Also, Williams' high debt levels make it vulnerable to an extended drop in commodity prices.

Stocks to Consider

Some better-ranked players from the broader energy sector include Braskem S.A. BAK, RPC, Inc. RES and Cheniere Energy Partners, L.P. CQP. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.

In the last quarter, Cheniere Energy Partners posted a positive earnings surprise of 185.71%.

the last quarter, RPC, Inc. posted a positive earnings surprise of 14.29%.

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