The Williams Companies: Gas Demand Is Far-Reaching, Healthy Q1 Results And FCF

Core Viewpoint - The Williams Companies (WMB) is positioned as a strong investment opportunity within the energy sector, particularly in the natural gas infrastructure space, with positive earnings growth and technical momentum anticipated in the coming quarters [4][20]. Company Overview - Williams operates primarily in the U.S. energy infrastructure sector, focusing on natural gas through various segments including Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services [4]. - The company reported Q1 2024 non-GAAP EPS of $0.59, exceeding Wall Street's consensus of $0.49, with revenues of $2.77 billion, a 10% decline year-over-year, but still a modest beat [4]. Financial Performance - Q1 adjusted EBITDA reached $1.93 billion, marking an 8% increase from the previous year and a 9% beat on expectations [4]. - The dividend coverage ratio stands at 2.6x, with a current yield of 4.9% [4][10]. - Analysts project adjusted EBITDA for the year to be between $6.95 billion and $7.1 billion, driven by higher natural gas demand, particularly from LNG exports and data center power demand [9]. Earnings and Valuation Forecast - Earnings per share (EPS) are expected to decline by 4% in 2024 but are projected to rebound in subsequent years, with estimates of $1.84 in 2024, $1.99 in 2025, and $2.02 in 2026 [11]. - The current P/E ratio is approximately 20x, which is higher than many peers in the energy sector, but the EV/EBITDA ratio remains competitive at around 10 [10][12]. Market Trends - The energy transport sector has seen a 34% year-over-year increase, outperforming the S&P 500 [4]. - Data center power demand is expected to double, reaching 8% of total U.S. power demand by 2030, contributing to increased energy infrastructure needs [5][6]. Technical Analysis - WMB shares have recently broken through key resistance levels, indicating bullish momentum, with a price target of approximately $48 based on technical patterns [18][20]. - The long-term 200-day moving average is upward-sloping, suggesting a positive primary trend for the stock [18].