Williams Companies: A Natural Gas Play that Thrives

Williams Companies, Inc. (WMB) is a Zacks #1 Rank (Strong Buy) company that continues to trade near a 52-week high, while the market struggles. In mid-May, Williams Companies increased its dividend by 10%. The company has paid a dividend every quarter since 1974 with this hike serving as the fifth increase since late 2004. Full-year 2008 analyst earnings expectations of $2.12 per share are up from last month’s $2.03. The most accurate estimate is a much more bullish $2.43 per share. WMB’s 3 – 5 year earnings per share growth expectation of 15% is almost double the industry’s average of 8%.

Full Analysis

Williams Companies is a publicly traded master limited partnership that, through its subsidiaries, finds, produces, gathers, processes and transports natural gas. Williams' operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, and Eastern Seaboard.

Income

In mid-May, Williams Companies increased its regular dividend on common stock. The new dividend of 11 cents per share is payable on June 30, 2008, to shareholders of record at the close of business on June 13, 2008.

The company said the new dividend is 10% higher than the 10 cents per share that it paid in each of the four prior quarters, adding that it has paid a common stock dividend every quarter since 1974 with this hike serving as the fifth increase since late 2004.

Growth

In early May, the Zacks #1 Rank (Strong Buy) company announced first-quarter earnings of 57 cents per share, excluding items. The result was well ahead of the year-prior total and topped the consensus estimate 16%. WMB referenced its strong midstream and pipeline businesses as a major contributor to the growth in earnings.

The company, which continues to trade near a 52-week high despite a tough market, offers a return on equity [ROE] of 18%, versus the industry’s average of 13%. WMB’s 3 – 5 year earnings per share growth expectation of 15% is almost double the industry’s average of 8%.

Higher Forecasts

The company also hiked its full-year consolidated earnings guidance to a range of $1.70 to $2.10 per share, up from the previous $1.60 to $2.00 per share.

Wall Street estimates have been climbing higher as well. Full-year 2008 expectations of $2.12 per share are up from last month’s $2.03. The most accurate estimate is a much more bullish $2.43 per share.

Comments

[sharksm:]

I bought 10,000 shares of WMB @ $2.72 in 2003. So much for those who advise against buy & hold!

2008 Jun 15 10:38 AM

[occasionall...:]

I pretty much stopped reading when, under the heading of "Full Analysis", Williams Companies was described as a master limited partnership. Although it has established a couple of limited partnerships, Williams Companies itself definitely is not one.

With such a fundamental error beginning "Full Analysis", everything that follows is suspect.

2008 Jun 15 10:51 AM

[JD59:]

Smart buy Sharksm! The next big winner like WMB is SCU. Storm Cat Energy. stormcatenergy.com
Take a look at their company's presentation on their website. The CEO recently stated that SCU was undervalued from a NAV, their current leases in PRB, Fayetteville Shale, Elk Valley, and Alaska, are worth more then the current stock price.

2008 Jun 15 10:55 AM

[sharksm:]

I don't buy Amex or Nasdaq single digit stocks. they are too risky for me. Remember, WMB had been a $55.00 stock until it got involved in energy trading during the Enron debacle, and fell. When I bought the stock the NAV was close to $20.00. I also bought 10,000 shares of EP at $4.00 and still hold it But bought 10,000 MIR at $5.00 and lost it all when they went chapter 11. I did note however, that thhe CEO of SCU recentlly bought 10,000 shares. Good luck!

2008 Jun 15 01:04 PM

[billp37:]

Williams is apparently closing its Lybrook plant in in 2010.

www.prosefights.org/pn...

Does anyone know why?

2008 Jun 15 09:30 PM

[Ketul Kirti...:]

Here's an analysis on why Williams is a buy:
usequity.blogspot.com/...

2008 Aug 05 02:29 PM