RE: Williams Companies (WMB) - earnings Trading at an All Time High
At the high end of Valuation at 26x Forward PE and only 3.3% FCF yield
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Williams Companies (WMB) Q4 2024 Earnings Summary Quarterly & Full Year 2024 Results:
- Record Adjusted EBITDA of $7.08 billion, up 4.4% year-over-year Ryortho
- GAAP net income of $2.222 billion ($1.82 per share) Ryortho
- Adjusted net income of $2.347 billion ($1.92 per share) Ryortho
- Cash flow from operations: $4.974 billion Ryortho
- Available funds from operations (AFFO): $5.378 billion, up 3.2% Ryortho
- Record contracted transmission capacity: 33.4 Bcf/d, up 3.4% from 2023 Ryortho
Dividend & Returns:
- Dividend increased 5.3% to $2.00 annualized (quarterly $0.525/share) Ryortho
- Dividend coverage ratio: 2.32x Ryortho
- 5-year annualized total shareholder return of nearly 30% Ryortho
Key Strategic Achievements:
- Completed Regional Energy Access, Southside Reliability Enhancement, and Carolina Market Link expansions
- Integrated 115 Bcf of Gulf Coast Storage capacity with first 10 Bcf expansion announced Ryortho
- Six new transmission projects announced in 2024 adding 885 MMcf/d of capacity Ryortho
- Replaced 92 compressor units, reducing emissions and operating expenses
WMB 2025-2026 Valuation Proposition 2025 Guidance (Raised): - Adjusted EBITDA: $7.45-$7.85 billion (midpoint $7.65 billion, up 3% from prior guidance) Ryortho
- Represents 5-year CAGR of 8% through 2025 Ryortho
- Growth capex: $1.65-$1.95 billion Ryortho
- Maintenance capex: $650-$750 million Ryortho
- Target leverage ratio: 3.55x for 2025 Ryortho
Current Valuation Metrics: Stock Price: $68.26 (as of Feb 9, 2026) FinancialContent
Market Cap: $82.1 billion FinancialContent
P/E Ratios:
2025-2026 Projections:
- 2025E Adjusted EPS: ~$2.00 (based on $2.347B net income / 1.22B shares)
- 2026E Forward P/E: 26.2x (based on analyst estimates)
- Dividend Yield: 2.9% Simply Wall St at current price
Free Cash Flow Analysis: 2024 Performance:
- Operating cash flow: $4.974 billion Ryortho
- Capital expenditures: $2.573 billion Ryortho
- Free Cash Flow: ~$2.4 billion
- FCF Yield: $2.4B / $82.1B = 2.9%
Projected 2025 FCF:
- Estimated OCF: ~$5.2 billion (based on EBITDA growth)
- Capex guidance: ~$2.5 billion (midpoint of $2.3-$2.7B)
- Projected FCF: ~$2.7 billion
- Projected FCF Yield: ~3.3%
Growth Profile: Expected CAGR:
- EBITDA CAGR (2020-2025): 8% (company disclosed)
- Dividend CAGR (5-year): 5% (company disclosed)
- 2025-2026E Revenue CAGR: ~3-4% (based on guidance and expansion projects)
- 2025-2026E EPS CAGR: ~4-5% (driven by EBITDA growth and leverage optimization)
Valuation Summary:
MetricValueAssessment<tbody]| 2026 Forward P/E | 26.2x | Premium to midstream average (~18-20x) | | FCF Yield (2024) | 2.9% | Solid for infrastructure | | Projected FCF Yield (2025) | 3.3% | Improving with capital discipline | | Dividend Yield | 2.9% | Attractive, well-covered (2.32x) | | Expected EBITDA CAGR | 8% | Industry-leading growth | | Expected Dividend CAGR | 5% | Consistent growth trajectory | | Analyst Price Target | $69.90 average (range $53-$83) FinancialContent | 2.4% upside to avg; 21.6% to high | | Enterprise Value/EBITDA TradingView | 14.73x | Fair for quality infrastructure |
Investment Considerations: Positives:
- Irreplaceable Transco pipeline - connects major supply to demand centers (Gulf Coast to Northeast)
- Industry-leading 8% EBITDA CAGR driven by record natural gas demand
- 14 high-return transmission projects in execution Ryortho, including Southeast Supply Enhancement (1.6 Bcf/d)
- Strong dividend coverage (2.32x) with 50-year payment history
- Data center and LNG export demand tailwinds
- Leverage improving to 3.55x target Ryortho
- 97% fee-based revenue model (low commodity exposure)
Considerations:
- Premium valuation (26x forward P/E vs. ~18-20x midstream peers)
- Natural gas price volatility could impact volumes
- Regulatory/permitting risks for expansion projects
- High debt load ($26.7B) despite improving metrics
Verdict: WMB offers a compelling growth story in the midstream space with its 8% EBITDA CAGR significantly outpacing peers. The stock trades at a premium valuation (26x forward P/E) which is justified by its irreplaceable Transco asset, robust project pipeline, and exposure to secular growth drivers (LNG, data centers, power generation). The 2.9% dividend yield with 2.32x coverage plus 5% annual dividend growth provides attractive income with growth. At current levels near $68, the stock appears fairly valued with modest upside to the $70 average analyst target, but offers a high-quality way to play the natural gas infrastructure buildout over the next 5+ years.
Key Investment Thesis: Premium quality infrastructure asset with visible 8% EBITDA growth, strong FCF generation improving to 3.3% yield, and well-covered 2.9% dividend growing at 5% annually - ideal for income-focused investors seeking exposure to natural gas demand growth. |
