ET vs. WMB: Which Oil & Gas Midstream Stock is a Smarter Buy?

A comparative analysis by Zacks favors Energy Transfer (ET) over The Williams Companies (WMB) in the oil and gas midstream sector, citing ET's diversified portfolio, increasing earnings estimates for 2025 and 2026 (up 2.86% and 4.26% respectively), and a lower forward P/E ratio of 12.2x compared to WMB's 26.88x; WMB's earnings estimates have either remained unchanged or declined, and the company carries a higher debt-to-capital ratio and a lower current ratio, raising concerns about financial flexibility, although WMB benefits from rising natural gas demand.

Analysis

The U.S. oil and gas midstream sector benefits from a positive long-term outlook driven by steady domestic energy consumption, growth in liquefied natural gas (LNG) exports, and the transition from coal to natural gas, with operators typically enjoying stable, fee-based revenues. In a comparative analysis, Energy Transfer (ET) shows stronger investment appeal than The Williams Companies (WMB). ET's earnings estimates for 2025 and 2026 have seen upward revisions of 2.86% and 4.26% respectively, and it trades at a lower forward 12-month Price/Earnings (P/E F12M) ratio of 12.2X. This valuation is notably below WMB's P/E F12M of 26.88X and slightly under the Zacks Oil & Energy Sector average of 12.36X. Furthermore, ET has demonstrated superior recent price performance, gaining 6.9% in the last month, compared to WMB's 2.5% and the sector's 3.7% gain. Conversely, WMB's 2025 earnings estimates are unchanged, while its 2026 estimates have declined by 2.03%. Although WMB exhibits a higher Return on Equity (ROE) of 15.95% versus ET's 11.47% and the sector's 14.67%, it carries a higher debt-to-capital ratio at 64.84% (compared to ET's 56.43%) and a low current ratio of 0.40 as of Q1 2025, indicating potential financial flexibility concerns. Energy Transfer's diversified portfolio and planned growth capital expenditures of nearly $5 billion for 2025 further bolster its prospects, leading to its Zacks Rank #2 (Buy) status over WMB's Zacks Rank #3 (Hold).

Key Decisions for Investors

• Investors should consider Energy Transfer's (ET) more favorable investment profile, supported by its positive earnings estimate revisions, lower forward P/E ratio of 12.2X, and stronger recent share price performance.
• Close scrutiny of The Williams Companies' (WMB) higher debt-to-capital ratio of 64.84% and low current ratio of 0.40 is warranted, as these factors may present financial flexibility challenges despite its superior ROE.
• Given the sector's capital-intensive nature, ET's significant growth capital expenditure plans and diversified assets may offer a more robust outlook compared to WMB, even as WMB is positioned to benefit from rising natural gas demand linked to AI and data centers.