Williams Companies Hits 52- Week High - Analyst Blog

Shares of North American energy firm, Williams Companies Inc. WMB soared to a 52-week high of $46.15 on May 19, 2014. The closing price of the Tulsa, OK-based company, as of the said date, was $45.94, representing an impressive year-to-date return of 20.01%.

This price appreciation can be attributed to its ability to generate highly visible cash flow and dividend growth over the next several years. The cash flow at Williams Companies is projected to increase by over 65% from 2013 to 2016. Moreover, the company expects its annual dividend payment to increase 20% in each of 2014, 2015 and 2016.

Why the Bullishness?  

Williams Companies is a premier energy infrastructure provider in North America. The company's core operations include finding, producing, gathering, processing, and transportation of natural gas.

Furthermore, Williams Companies' midstream assets, which are less sensitive to commodity prices, help it to maintain a steady stream of revenues and cash flow even if natural gas prices stay low. The company is also poised to benefit from the rebound in industrial activity, which will include increased natural gas demand in the form of natural gas liquids.

Finally, last month, Williams Companies reported strong first-quarter 2014 results, primarily attributable to improved performance by the company's core business segments and higher fee-based revenues. Adjusted earnings per share came at 28 cents, 27.3% higher than the prior-year quarter level of 22 cents. The bottom line also beat the Zacks Consensus Estimate.

Zacks Rank & Stock Picks

With Williams Companies shares trading at 52-week high, any upside from here may be limited, as suggested by its Zacks Rank #3 (Hold). Moreover, we remain concerned about volatile natural gas prices which could dampen the company's near-term growth prospects.

Meanwhile, one can look at better-ranked players in the same industry like EQT Midstream Partners LP EQM, Holly Energy Partners L.P HEP and Pembina Pipeline Corporation PBA. All these stocks sport a Zacks Rank #1 (Strong Buy).