TCC takes a look at what the sell side firms have to say regarding Williams Companies stock

Published By: Myrna Salomon on January 11, 2017 08:52 am EST

Williams Companies (NYSE:WMB), in a move to lower its leverage, initiated a financial repositioning deal with its general partner Williams Partners LP (NYSE:WPZ). The investors did not seem to appreciate the deal and began a massive sell-off causing the stock to close 10% down on Tuesday’s trading. We take a look at how some of the sell side firms have reacted to the latest development.

Christopher Sighinolfi, analyst at Jefferies, seemed to be unhappy with the latest propositions. The analyst downgraded the stock to a Hold from a Buy. The 12 month price estimate for the stock was estimated at $22.

Williams Companies for quite a long time is trying to simplify its structure. When it finally did, it received all sorts of criticism from investors and sell side firms. Mr. Sighinolfi indicated that while this simplification would increase dividends with a healthy growth rate, reduce equity needs, and help the company deleverage its operations, it may bring in some other problems.

The latest move by Williams Companies was seen by Mr. Sighinolfi as under appreciating William Companies’ incentive distribution rights (IDRs) position and posing a problem for the company’s upside position.

While Jefferies took a rather bearish stance on Williams Companies, Stifel was not that strict and upgraded the stock from a Hold to a Buy. The 12 month stock price was also boosted from $37 to $43. Stifel earlier had expressed concern over William Companies’ high cost of capital. The latest deal addresses this issue by not only lowering the cost of capital but also eliminating IDRs.

Out of the 18 analysts covering William Companies stock, six rate it as a Buy, two an Overweight, eight a Hold and one each with an underweight and a Sell. The 12-month price estimate for the stock is $32.27.