Analyzing Phillips 66 Partners (PSXP) & Williams Companies (NYSE:WMB)

Phillips 66 Partners (NYSE: PSXP) and Williams Companies (NYSE:WMB) are both mid-cap energy companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Profitability

This table compares Phillips 66 Partners and Williams Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Phillips 66 Partners 42.19% 23.56% 9.55%
Williams Companies 5.90% 3.23% 1.02%

Risk & Volatility

Phillips 66 Partners has a beta of 1.47, meaning that its share price is 47% more volatile than the S&P 500. Comparatively, Williams Companies has a beta of 1.36, meaning that its share price is 36% more volatile than the S&P 500.

Earnings and Valuation

This table compares Phillips 66 Partners and Williams Companies’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Phillips 66 Partners $873.00 million 7.58 $301.00 million $2.36 23.08
Williams Companies $7.50 billion 3.65 -$424.00 million $0.57 58.07

Phillips 66 Partners has higher earnings, but lower revenue than Williams Companies. Phillips 66 Partners is trading at a lower price-to-earnings ratio than Williams Companies, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Phillips 66 Partners and Williams Companies, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Phillips 66 Partners 0 4 8 0 2.67
Williams Companies 0 2 11 1 2.93

Phillips 66 Partners currently has a consensus price target of $58.30, suggesting a potential upside of 7.05%. Williams Companies has a consensus price target of $34.00, suggesting a potential upside of 2.72%. Given Phillips 66 Partners’ higher probable upside, equities research analysts clearly believe Phillips 66 Partners is more favorable than Williams Companies.

Insider & Institutional Ownership

37.2% of Phillips 66 Partners shares are held by institutional investors. Comparatively, 84.8% of Williams Companies shares are held by institutional investors. 0.5% of Williams Companies shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Phillips 66 Partners pays an annual dividend of $2.58 per share and has a dividend yield of 4.7%. Williams Companies pays an annual dividend of $1.20 per share and has a dividend yield of 3.6%. Phillips 66 Partners pays out 109.3% 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 210.5% 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 has increased its dividend for 4 consecutive years. Phillips 66 Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Phillips 66 Partners beats Williams Companies on 10 of the 18 factors compared between the two stocks.

About Phillips 66 Partners

Phillips 66 Partners LP (Phillips 66) owns, operates, develops and acquires fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. The Company’s assets consist of systems, such as Clifton Ridge Crude System, Eagle Ford Gathering System, Ponca Crude System, Billings Crude System, Borger Crude System, Sweeny to Pasadena Products System, Hartford Connector Products System, Gold Line Products System, Cross-Channel Connector Products System, Ponca Products System, Billings Products System, Bayway Products System, Standish Pipeline, Borger Products System, River Parish NGL System, Medford Spheres, Bayway Rail Rack, Ferndale Rail Rack, Sand Hills/Southern Hills Joint Ventures, Explorer Pipeline Joint Venture, Bakken Joint Ventures, Bayou Bridge Pipeline Joint Venture, STACK Pipeline Joint Venture, and Sweeny Fractionator and Clemens Caverns.

About Williams Companies

The Williams Companies, Inc. is an energy infrastructure company. The Company is focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGL), and olefins. As of December 31, 2016, its interstate gas pipelines, midstream and olefins production interests were held through its investment in Williams Partners L.P. (WPZ). The Company’s segments include Williams Partners, Williams NGL & Petchem Services and Other. The Williams Partners segment includes its consolidated master limited partnership, WPZ. The gas pipeline business includes interstate natural gas pipelines and pipeline joint project investments. The midstream business provides natural gas gathering, treating, processing and compression services. The Williams NGL & Petchem Services segment includes its Texas Belle pipeline and certain other domestic olefins pipeline assets. Other segment includes its corporate operations and Canadian construction services company.

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