Why Williams Companies Stock Rebounded 22% in January

What happened

Shares of Williams Companies (NYSE:WMB) rallied 22.1% in January, according to data provided by S&P Global Market Intelligence. Several positive catalysts fueled the natural gas pipeline company's stock last month, helping it rebound from a rough 2018, in which it lost nearly 28% of its value even though it completed several important strategic transactions and cash flow growth reaccelerated.

So what

One issue that seems to have weighed on Williams Companies' stock last year was the slump in oil prices during the fourth quarter, which caused shares of most energy stocks to sell off. Williams' plunge, however, seemed a bit much, since it has very little exposure to commodity prices given that long-term fee-based contracts underpin 97% of its cash flow. Despite that fact, Williams' correlation to crude prices continued in January, though this time to the upside as oil rallied 18%, which helped ignite the rally in the company's stock.

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In addition to the boost from a rebound in the oil market, Williams also benefited from a couple of analysts' upgrades. Bernstein boosted its rating on the stock from market perform to outperform, while Barclays upgraded shares from equal weight to overweight. In raising its rating, Barclays noted that Williams' strategic initiatives last year position it to reduce leverage at an accelerated pace and either internally fund incremental expansion projects or return more money to shareholders.

Speaking of expansions, Williams got the green light to start service of its Gulf Connector project last month, which will provide a boost to earnings during 2019. Meanwhile, the company's Northeast Supply Enhancement project received a positive environmental review last month. That increases the probability that the company will be able to move forward with the construction of this project, which, if everything goes according to plan, could provide incremental cash flow next winter. Expansions like these, which will both move more natural gas, should further reduce Williams' exposure to oil price volatility.

Now what

Williams Company's stock continues to be very volatile even though the company has gone to great lengths to reduce risk, including its direct exposure to oil prices. These actions should eventually make the company's stock price less susceptible to wild swings. That's one of the many reasons why this pipeline stock looks like an ideal option for risk-averse retirees to consider.