Pipeline operator Williams Cos. ( NYSE: WMB ) was downgraded to a Sell rating from Neutral at Goldman Sachs. The investment bank cited slower earnings growth, limited ability for higher dividends and a shift in its business mix as key reasons for the lower rating.
“We acknowledge WMB’s asset breadth could provide more growth opportunities than we currently model, given the still-strong natural gas demand backdrop,” John Mackay, analyst at Goldman Sachs, said in the Sept. 7 report, “but we see these potential tailwinds as over-reflected in strong YTD performance for the stock.”
The bank predicted that the compound annual growth rate in Williams’s EBITDA for its core pipeline business will slow from about 4% to 2% until 2027. Elevated capital expenditures will limit the company’s ability to increase its dividend growth from the current rate of about 3% to 4% a year, according to Goldman Sachs.
The bank lowered its 12-month price target to $30 a share from $35 based a multiple of 9.75 times its EBITDA estimate for 2023.
Williams this year has risen 20%, contrasting with a 17% slump for the S&P 500 Stock Index ( SP500 ).
The stock on Thursday slipped 3.6% to $31.68 a share as of 12:25 p.m. ET.
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Williams Cos. downgraded to Sell at Goldman Sachs on slower earnings growth