The Williams Companies Breaks Out After Strong Earnings

CEO sees natural gas demand growth remaining strong

The Williams Companies, Inc. (WMB) stock jumped over 8% Tuesday after the Oklahoma-based midstream energy giant beat analysts' second quarter expectations. Adjusted earnings for the period came in at 25 cents per share, comfortably surpassing the Street consensus of 23 cents a share. Still, the company's bottom line contracted 3.8% on a year-over-year basis amid a weaker performance from its Transmission & Gulf of Mexico and West operations. Meanwhile, revenues of $1.78 billion declined from $2.04 billion in the same quarter last year.

Despite the ongoing challenges from the coronavirus pandemic, Williams Companies CEO Alan Armstrong believes that natural gas market fundamentals remain strong. "We remain bullish on natural gas demand growth because we recognize the critical role natural gas plays in a clean energy economy," he told investors during the earnings call. Through Tuesday's close, the stock has a market capitalization of $25.89 billion, offers an 8.11% dividend yield, and is trading 3.55% lower so far this year. However, the shares have recovered by about 10% over the past three months.

Bulls drove the price above what looks like the neckline of an inverse head and shoulders pattern after the positive quarterly result. Furthermore, the 50-day simple moving average (SMA) crossed above the 200-day SMA late last month – a signal that often marks the start of a new uptrend. Those who open a long position should book profits on a move to $27, where price encounters significant resistance from a key horizontal line. Limit downside risk by placing a stop just below the 200-day SMA.

Chart depicting the share price of The Williams Companies, Inc. (WMB)

Below, we take a closer look at two other leading midstream energy stocks that rallied in the wake of The Williams Companies' upbeat quarterly result.

Kinder Morgan, Inc. (KMI)

Kinder Morgan, Inc. (KMI) operates as an energy infrastructure company in North America, with 70,000 miles of U.S. natural gas pipelines and roughly 10,000 miles of oil and refined products pipelines. The 84-year-old energy firm saw its second quarter earnings decline 22.7% from the year-ago period on the back of lower contributions from its Tennessee gas pipeline and reduced demand for refined products. Despite Kinder Morgan stock trading 27.85% lower on the year, it has outperformed the oil and gas midstream industry average by nearly 3% as of Aug. 5, 2020. It also offers an enticing 7.48% dividend yield.

The company's share price launched over 3% higher from crucial support at $14 Tuesday in a move that could see bulls test a multi-month downtrend line around $16. If the stock clears this area, look for a possible run-up to major resistance at $18.50. Those who buy at these levels should consider placing a stop-loss order beneath the July 31 low at $13.80 to protect trading capital.

Chart depicting the share price of Kinder Morgan, Inc. (KMI)


With a market value of almost $13 billion, ONEOK, Inc. (OKE) gathers, processes, stores, and transports natural gas in the United States. The company, which has assets in the Permian and Rocky Mountain regions, reported second quarter adjusted earnings of 32 cents per share on revenues of $1.7 billion. These figures contracted 57.3% and 32.4%, respectively, from the June 2019 quarter due to weaker demand for energy products caused by the pandemic. As of Aug. 5, 2020, the shares yield an eye-watering 13.3% but have slumped nearly 60% year to date. However, analysts have a 12-month price target on the stock at $33.71, indicating a 15% premium from Tuesday's $29.19 close.

After finding a floor of support at $25 from previous price action and the 61.8% Fibonacci retracement level, the stock has ground steadily higher over the past three weeks. Swing traders who enter here should think about setting a take-profit order near $46.65, where the shares find a confluence of resistance from the top of the Fibonacci grid and downward-sloping 200-day SMA. Cut losses if the stock fails to hold above $25 support.

Chart depicting the share price of ONEOK, Inc. (OKE)
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