Williams Partners Dropped: What You Need to Know

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Williams Partners (NYS: WPZ) somehow sidestepped yesterday's market massacre, levitating 2% in a turbulent environment. But the law of gravity will not be defied. Today, Williams is trading as much as 14% lower.

So what: Q2 earnings blew out the box Wednesday, contributing to yesterday's gravity-defying rise. Williams reported earning $0.91 per unit, versus $0.66 earned the previous year's Q2 -- and versus Street expectations of just $0.38.

Now what: But if Williams did so well last quarter, why are investors now selling the stock? I'm taking a shot in the dark here, but could it be ... the price? Analysts on average think Williams will grow its earnings at about 7% per year over the next five years. Even after Q2's blowout results, though, the company still trades for more than 13 times this year's earnings -- and 14 times next year's haul, which analysts expect will be lighter than this year's. Result: The shares looked overpriced yesterday, and only fairly priced today.

But what if Williams continues to grow faster than analysts expect?Add the stock to your Fool Watchlistand find out what happens then.

At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of Williams Partners. The Motley Fool has adisclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners