Williams Companies (WMB) PT Raised to $80 at Wells Fargo, Remains Top Pick

Wells Fargo analyst Praneeth Satish raised the price target on Williams Companies (NYSE: WMB) to $80.00 (from $71.00) while maintaining a Overweight rating.

The analyst comments "Analyst Day Checks All Boxes. WMB delivered across all the expectations we laid out in our preview note as the company: (1) issued a strong 5 year EBITDA CAGR of 10%+ vs our 9% bogey, (2) reached FID on a new power project, Socrates The Younger, along with expansions at several existing sites, (3) lifted the power backlog to 6 GWs vs an implied backlog of ~5 GWs prior, and (4) extended two existing power contracts to 12.5 years from 10 years. Contracted Backlog, Shadow Backlog...And Shadow Shadow Backlog. WMB has one of the largest opportunity sets in midstream. The co is executing on $12B of projects under construction (contracted backlog) & sees a pot'l (aka shadow) backlog of $37B ($15.5B in pipe + 6 GWs of power). Beyond that is a "shadow-shadow backlog" tied to turbine orders w/ CAT, Siemens & others. Our rough guess is WMB has ~10 GWs on order, implying an incremental shadow-shadow backlog of $14B. Note: turbine orders ≠ PPAs. WMB Raises 5-Year EBITDA CAGR To >10%... WMB expects EBITDA to increase at a 5-year CAGR of over 10% between 2025 & 2030. Mgmt noted that an ~8% CAGR is effectively "locked in" from FID projects and some modest G&P growth. New project FIDs in the coming year(s) will likely drive the CAGR to over 10%. WMB highlighted the potential to reach FID on several very large power deals later this year. ...But We Think WMB Can Grow At A 12% CAGR For 7 Years. Based on WMB’s pot'l transmission & power backlog and est in-service timing, we see a path to a 12% EBITDA CAGR for not just 5 years but 7 years. Our math (Exhibit 2) assumes WMB converts 100% of its potential backlog. While the pot'l backlog may not fully convert to FIDs, we think the power opportunity set is large enough (see shadow-shadow backlog) to offset any transmission slippage. We raise our 5-year EBITDA CAGR forecast to 12%. Sanity Checking Our PT. We recognize that our $80/sh PT implies WMB should trade at the highest valuation in midstream (15x 2027E EV/EBITDA), but we view this as warranted. Two sanity checks: (1) If we take our 2031 SOTP model and discount back to present, we arrive at a $85/sh valuation. (2) WMB currently trades at an implied 2030E EV/EBITDA of 9.2x vs 9.4x for the large cap, C-Corp peer group despite growing at over twice the rate (12% CAGR into 2030+ vs ~5% for peers)."

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