Wells Fargo sets the tone on these 2 energy stocks

In late April, natural gas prices at Henry Hub reversed their three-month decline and began to rise again. As a result, natural gas futures prices have now returned to the same levels as earlier this year. The price action also triggered a change in position. The prospect of higher prices and profits, amid rising demand, has sparked renewed investor interest. energy values.

Covering the energy sector for Wells Fargo, 5-star analyst Michael Blum examines the multiple reasons why he takes a bullish view of the energy sector – and it boils down to one simple conclusion: “We’re seeing expansion continued multiples for natural gas midstream stocks, driven by growing gas demand driven by AI, reshoring, LNG, etc.

Blum elaborates further, pointing out: “Investors generally view midstream investments negatively after going through a period of disappointing returns. However, investors’ investing psychology could be changing (at least for natural gas names). As ROIC increases and investors become more comfortable with the visibility of future returns (e.g. related to data center demand), we believe growth (and investment) could once again be considered favorably. Higher growth rates generally tend to support higher EV/EBITDA multiples.

Against this backdrop, Wells Fargo analysts Blum and colleagues advise investors to pull the trigger, particularly on two midstream natural gas stocks. We ran these tickers through the TipRanks Database to see what other Street experts think of their prospects.

The Williams Companies (WMB)

We’ll start with Williams Companies, a $50 billion name in the natural gas midstream sector. The company began operations in 1908, building pipelines for the growing oil industry. Today, Williams owns and operates a continent-wide network of natural gas assets, including gathering and storage facilities, pipelines and processing plants.

This system is centered on the Gulf Coast of Texas, Louisiana, and Mississippi and extends into the Gulf and east to Florida. In the northeast, the company’s network extends to the natural gas fields of the Appalachian Mountains, while in the northwest, it extends across the plains to the central Rocky Mountains and up in the northwest Pacific. The Williams companies help transport about one-third of all natural gas used in the United States for cooking, home heating and electricity generation.

All of this represents more than just big business: it represents billions of dollars in revenue. Williams reported 1Q24 revenue of $2.77 billion, down 10% from a year earlier but beating forecasts by $80 million. In other key metrics, the company reported $1.234 billion in cash flow from operations and said it had $1.507 billion in available funds from operations. The latter figure was up 4%, or $62 million, year over year.

The story continues

Ultimately, Williams delivered non-GAAP net income of $719 million, supporting EPS of 59 cents…