Critical Comparison: Energy Transfer LP Unit (ET) & Williams Companies (WMB)

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Energy Transfer LP Unit (NYSE:ET) and Williams Companies (NYSE:WMB) are both large-cap oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, earnings, analyst recommendations, dividends, profitability, risk and valuation.

Risk and Volatility

Energy Transfer LP Unit has a beta of 1.75, suggesting that its stock price is 75% more volatile than the S&P 500. Comparatively, Williams Companies has a beta of 1.71, suggesting that its stock price is 71% more volatile than the S&P 500.

Profitability

This table compares Energy Transfer LP Unit and Williams Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Energy Transfer LP Unit 2.58% 5.68% 1.98%
Williams Companies 24.15% 4.44% 1.53%

Analyst Recommendations

This is a summary of recent ratings and price targets for Energy Transfer LP Unit and Williams Companies, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Energy Transfer LP Unit 0 0 5 0 3.00
Williams Companies 0 2 15 0 2.88

Energy Transfer LP Unit currently has a consensus target price of $19.67, indicating a potential upside of 36.95%. Williams Companies has a consensus target price of $32.43, indicating a potential upside of 20.64%. Given Energy Transfer LP Unit’s stronger consensus rating and higher possible upside, equities analysts clearly believe Energy Transfer LP Unit is more favorable than Williams Companies.

Insider and Institutional Ownership

51.2% of Energy Transfer LP Unit shares are owned by institutional investors. Comparatively, 87.2% of Williams Companies shares are owned by institutional investors. 3.3% of Energy Transfer LP Unit shares are owned by insiders. Comparatively, 0.5% of Williams Companies shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Energy Transfer LP Unit pays an annual dividend of $1.22 per share and has a dividend yield of 8.5%. Williams Companies pays an annual dividend of $1.36 per share and has a dividend yield of 5.1%. Energy Transfer LP Unit pays out 100.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Williams Companies pays out 215.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Energy Transfer LP Unit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Energy Transfer LP Unit and Williams Companies’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Energy Transfer LP Unit $40.52 billion 0.41 $915.00 million $1.21 11.87
Williams Companies $8.03 billion 4.05 $2.17 billion $0.63 42.67

Williams Companies has lower revenue, but higher earnings than Energy Transfer LP Unit. Energy Transfer LP Unit is trading at a lower price-to-earnings ratio than Williams Companies, indicating that it is currently the more affordable of the two stocks.

Summary

Energy Transfer LP Unit beats Williams Companies on 10 of the 16 factors compared between the two stocks.

Energy Transfer LP Unit Company Profile

Energy Transfer LP provides diversified energy-related services in the United States. It owns and operates approximately 7,900 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas; and approximately 11,800 miles of interstate natural gas pipelines. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates natural gas and natural gas liquid (NGL) gathering pipelines, as well as natural gas processing plants, treating facilities, and conditioning facilities in Texas, New Mexico, West Virginia, Pennsylvania, and Louisiana; natural gas gathering, oil pipeline, and oil stabilization facilities in South Texas; a natural gas gathering system in Ohio; and transportation and supply of water to natural gas producers in Pennsylvania. The company also owns approximately 4,300 miles of NGL pipelines, 5 NGL and propane fractionation facilities, and NGL storage facilities with aggregate working storage capacity of approximately 53 million barrels. It also sells gasoline, middle distillates, and motor fuel at retail, as well as crude oil, NGLs, and refined products; operates convenience stores; and distributes motor fuels and other petroleum products. The company provides natural gas compression services; treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration, and British thermal unit management services; and manages coal and natural resources properties, as well as sells standing timber, leases coal-related infrastructure facilities, collects oil and gas royalties, and generates a total of 75 megawatts electrical power. The company was formerly known as Energy Transfer Equity, L.P. and changed its name to Energy Transfer LP in October 2018. The company was founded in 2002 and is based in Dallas, Texas.

Williams Companies Company Profile

The Williams Companies, Inc. operates as an energy infrastructure company primarily in the United States. It owns and operates natural gas pipeline system extending from Texas, Louisiana, Mississippi, and the Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, and New Jersey to the New York City metropolitan area. The company also owns and operates a natural gas pipeline system extending from the San Juan basin in northwestern New Mexico and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a point on the Canadian border near Sumas, Washington; gulfstream natural gas pipeline system extending from the Mobile Bay area in Alabama to markets in Florida; and constitution pipeline that would connect its gathering system in Susquehanna County, Pennsylvania to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York. In addition, it provides natural gas gathering, treating, processing, and compression services; natural gas liquids production, fractionation, storage, marketing, and transportation services; and deepwater production handling and crude oil transportation services. The company transports and stores natural gas to local natural gas distribution companies, municipal utilities, direct industrial users, electric power generators, and natural gas marketers and producers. As of December 31, 2017, it owned and operated approximately 13,600 miles of pipelines. The Williams Companies, Inc. was founded in 1908 and is headquartered in Tulsa, Oklahoma.

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