NEW YORK (TheStreet) -- Williams Companies (WMB) shares are up 5.93% to $53.07 in early market trading on Wednesday after the energy infrastructure company announced an agreement to purchase its subsidiary, Williams Partners (WPZ), in a stock deal valued at approximately $14 billion.
"We continue to see an expanding portfolio of projects to connect the best supplies of natural gas and natural gas products to the best markets. The lower cost of capital and improved tax benefits expected from this transaction increase our confidence in extending the duration of our expected 10 percent to 15 percent dividend growth rate through 2020," said CEO Alan Armstrong.
The deal is expected to close in the third quarter this year with the company forecasting annual dividend growth between 10% and 15% through 2020. The company also announced a 6.7% increase in its third quarter dividend payout to 64 cents per share.
TheStreet Ratings team rates WILLIAMS COS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate WILLIAMS COS INC (WMB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 50.00% to $669.00 million when compared to the same quarter last year. In addition, WILLIAMS COS INC has also vastly surpassed the industry average cash flow growth rate of -51.31%.
- The gross profit margin for WILLIAMS COS INC is rather high; currently it is at 50.52%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.07% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, WILLIAMS COS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- Despite the weak revenue results, WMB has significantly outperformed against the industry average of 37.8%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: WMB Ratings Report