Jim Cramer on Possible Williams Cos (WMB), Energy Transfer Deal: 'A Pipeline Colossus'

NEW YORK (TheStreet) --Shares of Williams Companies (WMB) are rising by 26.24% to $61.01 at the start of trading on Monday morning after the energy infrastructure company announced that it is exploring its strategic alternatives.

Williams Companies announced on Sunday that it received an unsolicited offer of $64 per share from an unnamed company, later identified as Energy Transfer Equity (ETE) by Reuters.

TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUS Charitable Trust Portfolio had this to say about the offer: "This deal would create a pipeline colossus. We own ETP for the trust and it would be a huge winner if this deal gets done because it could have pricing power that it does not have now."

The company said the $48 billion offer was contingent on the cancelation of Williams' pending acquisition of Williams Partners  (WPZ). Williams turned down the offer as it believes it undervalues the company. 

"The Williams Board carefully considered the unsolicited proposal and determined that it significantly undervalues Williams and would not deliver value commensurate with what Williams expects to achieve on a standalone basis and through other growth initiatives, including the pending acquisition of Williams Partners," the company said in a statement announcing the strategic review.

Separately, 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 several positive factors, 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 and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

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 -53.29%.
  • 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.
  • Despite the weak revenue results, WMB has significantly outperformed against the industry average of 38.7%. 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.
  • WILLIAMS COS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, WILLIAMS COS INC increased its bottom line by earning $2.82 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 66.3% in earnings ($0.95 versus $2.82).
  • You can view the full analysis from the report here: WMB Ratings Report

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