Buoyed by strong operating results and an enhanced guidance by management, we are upgrading The Williams Companies (WMB) to Outperform from Neutral. We like the company's strong business mix, attractive growth opportunities in its low-risk upstream model and relatively stable fee-based midstream services.
We also think that the just-concluded consolidation program will allow Williams to simplify its structure, pay down debt, drive growth and unlock value for shareholders. Furthermore, the company's proposal to split into two separate entities is expected to be long-term accretive.
As such, we believe that Williams offers meaningful long-term upside potential for investors. Our $37 price objective reflects a 2011 P/E multiple of 25.7x, well within the company's historical trading range.
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