Nanotechnology

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>>> IBM’s New CEO Is Mastermind Behind Cloud Strategy for Growth


By Olivia Carville

January 31, 2020


https://www.bloomberg.com/news/articles/2020-01-31/ibm-s-new-ceo-is-mastermind-behind-cloud-strategy-for-growth?srnd=premium


Krishna takes the reins after eight years of shrinking revenue

Big Blue has lagged behind nimbler rivals in cloud computing


In July of 2017, International Business Machines Corp. executive Arvind Krishna walked into a routine meeting with senior leaders and delivered a surprise pitch that changed the course of the iconic 108-year-old company’s future.

For months Krishna, the head of IBM’s cloud computing division, had been thinking about a way to connect clients’ most important data, which was often held on private servers, to public cloud servers run by others including IBM, Amazon.com Inc. and Microsoft Corp. Finally he proposed a way, creating IBM’s so-called hybrid multi cloud strategy.

The company was coming off of 19 consecutive quarters of shrinking revenue and lagging far behind rivals in cloud computing, the lucrative new field in business technology, when Krishna stood in front of a crowd of executives, including Chief Executive Officer Ginni Rometty, at the company’s Armonk, New York, headquarters. He ran a live demonstration of some of the hybrid cloud products from his Mac laptop.

“I showed an early version, not yet complete, of what we could do to about 60 or 70 senior leaders from inside IBM,” Krishna said in an interview last year. “I think the light-bulb went off for everybody.” The first question he received from the group was: when will it be ready to go to market?

IBM launched its hybrid cloud product three months later. Rometty called it a “game changer” for the company. Last year, at Krishna’s suggestion, IBM acquired open source software provider Red Hat for $34 billion to further that vision -- a strategy some Wall Street pundits believe will finally breathe life back into Big Blue.

On Thursday, IBM announced that Rometty would be stepping down after almost 40 years at the company and Krishna would be taking over. Though generally respected by her peers, Rometty, 62, inherited many challenges that she was ultimately unable to overcome. During her tenure, revenue and IBM’s valuation shrank by 25%, in opposition to other tech companies and the broader market, which have seen spectacular gains. Rometty, who will step down as CEO effective April 6, will stay on as executive chairman through the end of the year.

Restoring IBM even part way back to its glory days will require a radical transformation, steering the company away from its slow-growing unprofitable legacy businesses and toward the future of modern computing. Analysts say Krishna is up for the task.

Krishna, 57, has spent his entire career at IBM and witnessed the company’s ups and downs as it went from the world leader in computing and IT services to missing the cloud revolution and falling behind nimbler, younger rivals like Amazon.

Krishna’s elevation is reminiscent of the appointment of Satya Nadella, Microsoft’s cloud chief, into the CEO role in 2014. Like Krishna, Nadella also bet big on the cloud and won, boosting Microsoft’s market valuation to more than $1 trillion. IBM shares gained 4.5% Friday after the announcement of the leadership change, valuing the company at about $126 million.

As the new CEO of IBM, Krishna would be a “Nadella-like” leader – calm but deep, firm but unaggressive, said Rishikesha Krishnan, a professor of strategy at the Indian Institute of Management in Bangalore. “If a company intends to make a serious shift or change, he’d be the man.”

Krishnan studied with Krishna at India’s premier engineering school, the Indian Institute of Technology Kanpur. “IQ levels on the campus are high, but even then he stood out as smart and articulate,” Krishnan said.

Soft-spoken, relaxed and accessible, Krishna represents a new leadership style for IBM, which has an entrenched culture of bureaucracy and formalities. On a recent trip to India, he spent hours in the IBM cafeteria chatting to whomever approached him, according to a person who observed the interaction but didn’t want to be named describing a private event. He socialized with team members until the early hours of the morning, answering questions and offering market insights.

Krishna joined IBM in 1990 after studying in Kanpur and obtaining a Ph.D. in electrical engineering from the University of Illinois Urbana-Champaign. With vast industry knowledge and a tendency to speak at a rapid pace, Krishna can be hard to keep up with but is known for a willingness to simplify complex terms.

In an interview last February, Krishna was asked to describe hybrid-cloud computing in two sentences. He gave a thorough and speedy analysis of the intersection between public cloud, private cloud, data centers, applications, existing infrastructure and other technical terms. At the end of his answer, Krishna said: “Now that wasn’t quite two sentences, but it was no more than two minutes.” He then laughed, adding “was that all intelligible?”

IBM’s hybrid cloud strategy was “a long time coming,” Krishna said. “Maybe we should have done it a year or two earlier, but then there’s this question of would the world be ready? I think if we’d done it in 2015 it might’ve been too early.”

Others disagree, saying one of the main criticisms against Rometty was not launching IBM’s transition soon enough. IBM has a lot of catching up to do in the trillion-dollar cloud market where Amazon and Microsoft are far out in front, followed by Alphabet Inc.’s Google. They are all developing similar software in the hybrid-cloud market too. While IBM gained ground with the Red Hat purchase, the fierce competition with such formidable rivals won’t leave much room for error.

Former longtime IBM employee and historian James Cortada, a senior research fellow at the University of Minnesota, said hybrid cloud represents the company’s third radical transformation in its history. In the 1950s IBM moved from tabulating equipment to computers; in the 1990s it shifted to software and services; and now hybrid is the future. “Rometty initiated that next fundamental transition or transformation for the company, but that went too slowly for a lot of people,” Cortada said.

Krishna will also benefit from a strong partner in Jim Whitehurst, the 52-year-old CEO of Red Hat who was elevated to IBM president, the first time the company has given an executive that title on its own.

Whitehurst has been running a smaller but much faster growing company at the cutting edge of cloud migration, said Stifel Nicolaus & Co. analyst David Grossman. The combination of the two of them sets up a “very interesting and complimentary team.”

Together, Krishna and Whitehurst bring software to the core of the company.

“Now the two top dogs running IBM are cloud purists,” said Steve Duplessie, founder of Enterprise Strategy Group. “The old IBM died a while ago and they had to change. This lets them remake themselves before it’s too late.”

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>>> GE’s stock soars after earnings, as CEO Culp says turnaround is ‘gaining traction’


MarketWatch

By Tomi Kilgore

Jan 29, 2020


https://www.marketwatch.com/story/ges-stock-soars-after-earnings-as-ceo-culp-says-turnaround-is-gaining-traction-2020-01-29?siteid=yhoof2&yptr=yahoo


GE shares reach 15-month high on heavy volume; BofA analyst Andrew Obin turns bullish on upbeat free cash flow outlook

Shares of General Electric Co. climbed toward a more than one-year high Wednesday, after the long-struggling industrial conglomerate reported profit, revenue and free cash flow beats, and commentary from Chief Executive Larry Culp suggested the worst is behind the company.

After calling 2019 a “reset” year, Culp capped his first full calendar year in charge of GE by saying on the post-earnings conference call with analysts that he was seeing “evidence of momentum” across the company. “Despite areas of volatility in aggregate, we have a positive trajectory in 2020,” Culp said, according to a transcript provided by FactSet.

While 2019 was the “year one” in a multi-year transformation, he said the “lean transformation” was gaining traction this year.

The stock GE, -0.39% shot up 10.0% on heavy volume by Wednesday afternoon, on track for the highest close since October 2018. Volume spiked to 181.8 million shares, more than triple the full-day average of about 55.8 million shares, and enough to make the stock the most actively traded on major U.S. exchanges.

The stock has now run up 42% over the past three months and 51% the past 12 months. In comparison, the Dow Jones Industrial Average DJIA, +0.04% has gained 6.4% the past three months and has rallied 17% the past year.

Bank of America analyst Andrew Obin was quick to turn bullish on GE, citing an improved trajectory for free cash flow (FCF) in 2020 after years of being weak. He said GE’s guidance for industrial FCF of $2 billion to $4 billion this year was “materially higher” than his forecast of $1.8 billion. The FactSet consensus was $1.22 billion.

Obin raised his rating on GE to buy from neutral and boosted his stock price target to $16, which is 24% above current levels, from $12.

“GE’s turnaround will likely have ups and downs, but [the] company is making progress on key FCF drivers,” Obin wrote in a note to clients.

GE also said it expects industrial revenue to grow “organically” in the low-single-digit percentage range in 2020, industrial profit margin to expand organically in a range of zero to 75 basis points (0.75 percentage points) and adjusted earnings per share in the range of 50 cents to 60 cents. The FactSet EPS consensus was 67 cents.

The outlook for 2020 includes assumptions that Boeing Co.’s 737 MAX planes, which have been grounded since March 2019, and which GE builds engines for, will return to service in mid-2020, as per Boeing’s latest guidance.

For the fourth quarter, GE reported net income that fell to $538 million, or 6 cents a share, from $575 million, or 7 cents a share, in the year-ago period. Excluding non-recurring items, such as losses from non-operating benefits costs, BioPharma deal expenses and unrealized gains, adjusted earnings per share rose to 21 cents from 14 cents, beating the FactSet consensus of 17 cents, as industrial profit margin improved to 6.4% from 1.8%.

Total revenue fell 1.0% to $26.24 billion, above the FactSet consensus of $25.67 billion.

Within GE’s business segments, aviation revenue grew 6% to $8.94 billion to beat the FactSet consensus of $8.84 billion and renewable energy revenue rose 2% to $4.75 billion to top expectations of $4.44 billion.

Power revenue nudged up to $5.401 billion from $5.381 billion, but was below the FactSet consensus of $5.478 billion, while healthcare revenue inched up to $5.402 billion from $5.398 billion, to come up shy of expectations of $5.462 billion.

BofA’s Obin said the power business’s performance “was welcome” after a relatively weak third-quarter, while strength in the aviation business also contributed to his bullish view.

GE Capital, which completed asset reductions of about $8 billion during the quarter, and $12 billion in 2019, swung to a profit of $6 million from a loss of $177 million.

CRFA’s Jim Corridore reiterated his buy rating on GE and raised his price target to $14 from $12, saying he believes GE is “making strides” in its business transformation.

“Overall, we think the quarter showed solid improvement, and we think GE is on the right trajectory,” Corridore wrote.

Culp said he was planning to provide a “detailed” 2020 outlook by business segment on March 4, when it holds its investor call.

He also addressed those who may still be skeptical that the reported results for 2019 formed a platform to deliver “long-term profitable growth”:

“This year, much of our substantial progress was in areas less visible to those of you outside of GE,” Culp said. “This starts with how we run the company on a daily basis. We’re in the early days of a lean transformation developing leaders capable of identifying and solving problems alike, establishing standard work and embracing values of candor, transparency and humility.”

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Energy Transfer - >>> Warren Calls On Perry To Step Down From Energy Transfer Board


Bloomberg

By Rachel Adams-Heard

January 17, 2020


https://www.bloomberg.com/news/articles/2020-01-17/warren-calls-on-perry-to-step-down-from-energy-transfer-board?srnd=premium


Democratic presidential candidate calls board seat ‘unethical’

Ex-Energy Secretary Perry was appointed to board on Jan. 1

Democratic presidential candidate Elizabeth Warren is calling on former U.S. Energy Secretary Rick Perry to step down from the board of the general partner that controls Dallas-based pipeline giant Energy Transfer LP.

In a letter dated Jan. 16, Warren said Perry’s decision to join the board is “unethical” because Energy Transfer lobbied the Department of Energy he oversaw. The company is led by billionaire Kelcy Warren, who isn’t related to Elizabeth Warren.

“As Energy Secretary for the first two years of the Trump administration, you were one of the chief architects in planning and executing the federal government’s energy policy,” Warren wrote. “This is exactly the kind of unethical, revolving-door corruption that has made Americans cynical and distrustful of the federal government.”

Energy Transfer is “pleased to have Former Secretary Rick Perry as a board member of our general partner,” Vicki Granado, a spokeswoman for the company, said in an email. She said the company wouldn’t provide additional comment on board members.

Perry, a two-time U.S. presidential candidate who was Texas governor for more than a decade, was appointed to the board of LE GP LLC on Jan. 1. Energy Transfer is structured as a master limited partnership. The limited partner -- Energy Transfer LP -- is publicly traded, while the general partner is closely held, with Kelcy Warren controlling a majority stake.

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>>> Moody’s downgrades Ford credit rating to junk status


CNBC

SEP 9 2019

Associated Press


https://www.cnbc.com/2019/09/09/moodys-downgrades-ford-credit-rating-to-junk-status.html


Moody’s Investors Service has downgraded Ford’s credit rating to junk status.

The service says it expects weak earnings and cash generation as Ford pursues a costly and lengthy restructuring plan.
The ratings service said Ford’s outlook remains stable, but its cash flow and profit margins are below expectations and the performance of peer companies in the auto industry

Moody’s Investors Service has downgraded Ford’s credit rating to junk status.

The service says it expects weak earnings and cash generation as Ford pursues a costly and lengthy restructuring plan.

Ford responded with a statement saying that its underlying business is strong and its balance sheet is solid.

The rating for Ford’s senior unsecured notes and its corporate family dropped to Ba1, the top rating for debt that’s not investment grade. It had been Baa3, the lowest investment grade rating.

Ford’s fight to remain an American icon

Moody’s says it expects Ford’s restructuring to extend for several years with $11 billion in charges and a $7 billion cash cost.

The ratings service said Ford’s outlook remains stable, but its cash flow and profit margins are below expectations and the performance of peer companies in the auto industry. “These measures are likely to remain weak through the 2020/2021 period including a lengthy period of negative cash flow from the restructuring programs,” Moody’s Senior Vice President of Corporate Finance Bruce Clark wrote in a note to investors Monday.

Ford’s erosion in performance happened while the global auto industry was healthy, Clark wrote. Now the company and CEO Jim Hackett must address operational problems as demand for vehicles is softening in major markets, he wrote.

The company has $23.2 billion in cash, which is more than its debt, according to Moody’s. The stable outlook reflects Moody’s expectation that the restructuring will contribute to gradual improvement in earnings, profit margins and cash generation, Clark wrote.

Ford said it has plenty of liquidity to invest in its future.

“We are making significant progress on a comprehensive global redesign — reinvigorating our product lineup and aggressively restructuring our businesses around the world,” Ford’s statement said.

The statement said Ford already is addressing operating inefficiencies and problems with its China business.

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HSBC - >>> Hong Kong Turmoil Threatens Banking Giant


BY JAMES RICKARDS

NOVEMBER 27, 2019


https://dailyreckoning.com/hong-kong-turmoil-threatens-banking-giant/


Hong Kong Turmoil Threatens Banking Giant


Most investors recall how the global financial crisis of 2008 ended. Yet how many recall the way it began?

The crisis reached a crescendo in September and October 2008 when Lehman Bros. went bankrupt, AIG was bailed out and Congress first rejected and then approved the TARP plan to bail out the banking system.

The bank bailout was greatly magnified when the Fed’s Ben Bernanke and other bank regulators guaranteed every bank deposit and money market fund in the U.S., cut rates to zero, began printing trillions of dollars and engineered more trillions of dollars of currency swaps with the European Central Bank to bail out European banks.

This extreme phase of the crisis was preceded by a slow-motion crisis in the months before. Bear Stearns went out of business in March 2008. Fannie Mae and Freddie Mac both failed and were taken over by the government and bailed out in June and July 2008.

Even before those 2008 events, the crisis can trace its roots to late 2007. Jim Cramer had his legendary, “They know nothing!” rant on CNBC in August. Treasury Secretary Hank Paulson tried to bail out bank special purpose vehicles in September (he failed). Foreign sovereign wealth funds came to the rescue of U.S. banks with major new investments in December.

Still earlier, in June 2007, two Bear Stearns-sponsored hedge funds became insolvent and closed their doors with major losses for investors.

Yet even those late-2007 events don’t trace the crisis to its roots.

For that you have to go back to Feb. 7, 2007. On that day, banking giant HSBC warned Wall Street about its Q4 2006 earnings. Mortgage foreclosures had increased 35% in December 2006 compared with the year before. HSBC would take a charge to earnings of $10.6 billion compared with earlier estimates of $8.8 billion.

In short, the 2008 financial crisis began in earnest with a February 2007 announcement by HSBC that unforeseen mortgage losses were drowning the bank’s earnings. At that time, few saw what was coming. The warning was considered to be a special problem at a single bank. In fact, a tsunami of losses and financial contagion was on the way.

Is history about to repeat? Is HSBC about to lead the world into another mortgage meltdown?

Of course, events never play out exactly the same way twice. Any mortgage problem today does not exist in the U.S because mortgage lending standards have tightened materially including larger down payments, better credit scores, complete documentation and honest appraisals.

HSBC’s mortgage problem does not arise in the U.S. — it comes from Hong Kong.

Almost overnight, Hong Kong has gone from being one of the world’s most expensive property markets to complete chaos. The social unrest and political riots there have generated a flight of capital and talent. Those who can are getting out fast and taking their money with them.

As a result, large portions of the property market have gone “no bid.” Sellers are lining up but the buyers are not showing up. At the high end, owners paid cash for the most part and do not have mortgages. But HSBC has enormous exposure in the midrange and more modest sections of the housing market.

High-end distress also has a trickle-down effect that puts downward pressure on midmarket prices.

IMG 1

Your correspondent during my most recent visit to Hong Kong. Behind me are the hills of Hong Kong leading up to “the Peak,” the highest point in Hong Kong. Homes on the hills below the Peak are among the most expensive in the world. Due to recent riots, they are in danger of becoming “stranded assets” with no buyers due to capital flight and fear of worsening political conditions.

It’s important for investors to bear in mind that mortgage losses appear in financial statements with a considerable lag once the borrower misses a payment. Grace periods and efforts at remediation and refinancing can last for six months or more. Eventually, the loan becomes nonperforming and reserves are increased as needed, a hit to earnings.

Property price declines and mortgage distress that started last summer as the Hong Kong riots worsened will not hit the HSBC financials in a big way until early 2020. The HSBC stock price may be floating on air between now and then. But the reckoning with a burst bubble in Hong Kong will be that much more severe when it hits.

Another threat to the HSBC stock price comes from Fed flip-flopping on monetary policy. Throughout 2017 and 2018, the Fed was on autopilot in terms of raising short-term interest rates and reducing the base money supply, both forms of monetary tightening.

Suddenly, in early 2019, the Fed reversed course, lowered interest rates three times (July, September and October) and ended its money supply contraction.

The result was that a yield-curve inversion (short-term rates higher than longer-term rates) that emerged in early 2019 suddenly normalized. Short-term rates fell below longer-term rates. That is extremely positive for bank earnings and bullish for bank stock prices.

Now the Fed may be ready to flip-flop again. In their October 2019 meeting, the Fed’s FOMC indicated that rate cuts are on hold. This means that short-term rates may stop falling, but longer-term rates will continue to fall for other reasons including a slowing economy. The yield curve may invert again. This is a negative for bank earnings and a bearish signal for bank stocks including HSBC.

Will history repeat itself with a mortgage meltdown at HSBC leading the way to global financial contagion?

Right now, my models are telling us that the stock price of HSBC is poised to fall sharply.

This is due to the anticipated mortgage losses (described above), but also to an inefficient management structure, repeated failures to reform that structure and management turmoil as a new interim CEO, Noel Quinn, attempts to repair past blunders without the job security or support that comes with being a permanent CEO.

When Noel Quinn accepted the job of interim chief executive of HSBC in August, he had one condition. He told Chairman Mark Tucker he did not want to be a caretaker manager who would keep the bank chugging along until a permanent successor was appointed, according to people briefed on the negotiations.

Instead, Mr. Quinn, a 32-year veteran of HSBC, has embarked on a major restructuring of Europe’s largest bank.: He wants to rid the lender of its infamous bureaucracy while reducing the amount of capital tied up in the U.S. and Europe, where it makes subpar returns. To do so, he will have to slash thousands of jobs.

Investors are understandably skeptical. This is the third time the bank has attempted a big overhaul in a decade, following similar efforts in 2011 and 2015. But returns still lag behind global peers such as JPMorgan despite HSBC’s unparalleled exposure to high-growth markets in Asia, which accounts for about four-fifths of profits.

The stock has declined 11% in a year when stock markets were rallying robustly. Most of the drawdown occurred in August and was a direct response to the worsening political situation in Hong Kong.

While this drawdown is notable, it mostly reflects political anxiety and is not reflective of the mortgage losses that are just beginning to enter the picture. Once the reserves for mortgage losses are expanded to meet the rising level of nonperformance, look out below.

So I repeat the question: Is HSBC about to lead the world into another mortgage meltdown?

We might have an answer sometime next year.

Regards,

Jim Rickards

for The Daily Reckoning

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>>> Home Depot stock is still a good investment despite rare misstep: analysts


by Brian SozziEditor

November 19, 2019


https://finance.yahoo.com/news/home-depot-stock-is-still-a-good-investment-despite-rare-misstep-analysts-174731584.html


Wall Street is still in love with Home Depot (HD) as an investment.

But suffice it to say, Tuesday’s trading session for the king of home improvement could be filed under the abnormal column.

Home Depot shares fell about 5% in afternoon trading as third quarter same-store sales rose 3.6%, below analyst forecasts for 4.6% growth. U.S. same-store sales increased 3.8% versus projections for 5.4% improvement. It’s a rare quarterly sales shortfall for Home Depot — and so is the market’s reaction on earnings day.

Earnings came in a penny ahead of estimates at $2.53 a share.

Executives blamed the delayed impact of investments in business — focused on faster delivery of online orders, store remodels and offering new services to contractors — for the sales shortfall.

The company cut its full-year same-store sales outlook to 3.5% growth from 4% previously. It reiterated its full year earnings guidance of about $10.03 a share.

Wall Street by and large came out quickly to defend Home Depot’s stock, long a top play for many strategists. Some have reasoned Home Depot will continue to benefit from favorable dynamics in the housing market, ranging from low interest rates spurring remodeling activity to a pick up in building activity in 2020.

“The macro nature of their business is in better shape,” Gradient Investments portfolio manager Jeremy Bryan said on Yahoo Finance’s The First Trade. Gradient owns Home Depot shares.

To Bryan’s point, U.S. housing starts rebounded in October and housing permits rose to a more than 12-year high, the U.S. Commerce Department said Tuesday.

Others remain bullish on Home Depot’s longer term execution and how it’s doing well in the age of digital shopping.

“We expect some weakness in HD today, given the underwhelming results and likely downward estimate revisions. That said, with HD viewed as among the highest-quality names and with some macro tailwinds, we think the downside damage to the stock could be mitigated,” Nomura Instinet analyst Michael Baker wrote in a note to clients.

Baker’s bullishness was echoed by Jefferies analyst Jonathan Matuszewski.

“3Q comp sales were light, though operating margins in-line with expectations. We believe shares down in the pre-market create a buying opportunity, as we interpret lighter 2H results to be more tied to timing of returns on strategic investments vs. a softer macro picture. These results don't change our view of a favorable industry backdrop with ongoing home improvement center share gains across most categories,” Matuszewski said.

But make no mistake: if Home Depot doesn’t deliver in the fourth quarter, those defending its stock may not be so inclined to do so again.

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>>> Energy Transfer’s Q3 Earnings: What’s Next for Its Stock?


Market Realist

WRITTEN BY VINEET KULKARNI

11-6-19


https://marketrealist.com/2019/11/energy-transfers-q3-earnings-whats-next-for-its-stock/?utm_source=yahoo&utm_medium=feed&yptr=yahoo


Midstream infrastructure giant Energy Transfer (ET) plans to report its third-quarter earnings today after the market closes. The stock has been trading in a narrow range since last month and has lost almost 5% so far this year.

Notably, it has reported significant earnings growth in the last several quarters, although this trend couldn’t boost its stock. Its distributable cash flow and coverage ratio growth will be a key trend to watch today.

Energy Transfer’s earnings

Based on analysts’ estimates, Energy Transfer could report EBITDA of $2.73 billion in Q3 2019. This represents an increase of more than 11% compared to Q3 2018. During its Q2 earnings, the company increased its 2019 full-year adjusted EBITDA guidance range to $10.8 billion–$11 billion from $10.6 billion–$10.8 billion.

According to analysts’ estimates, Energy Transfer’s revenues could decrease by 4% YoY to $14 billion. The midstream company has exceeded analysts’ revenue estimates for four of the last eight quarters.

Management’s upbeat commentary could also boost Energy Transfer stock in the short term. Its capex guidance for Q4 and beyond should be interesting to see. The company reduced its planned capex for 2019 from $5.0 billion to $4.7 billion in Q2 2019.

Another focal point in Energy Transfer’s Q3 earnings would be its debt. Its large pile of debt is a concern for investors. How the management’s efforts on deleveraging fared during the quarter will also be key to watch.

In September, Energy Transfer agreed to buy oil and gas transport company SemGroup for $5 billion. How the company positions the SemGroup (SEMG) acquisition while trying to strengthen its balance sheet will also be crucial.

Will Energy Transfer increase distribution?

Investors must be waiting for a distribution increase, which hasn’t occurred for a while. So, any update on that front might drive Energy Transfer stock.

In its second-quarter earnings, its distributable cash flow increased sharply by 23% YoY to $1.6 billion. Its coverage ratio was 2.0x. The company offers a distribution yield of 9%, substantially higher than that of the broader markets and the benchmark Treasury yields.

Natural gas infrastructure company Williams Companies (WMB) reported its third-quarter earnings last week. It beat analysts’ earnings estimates but missed on revenue expectations. Its distributable cash flow increased by 8% compared to Q3 2018. WMB stock has also been subdued this year and has gained just 4% YTD.

Several brokerages cut Williams Companies stock’s price target after its Q3 earnings. Wells Fargo trimmed WMB’s price target to $26 from $29, while UBS also cut its target to $33 from $35. Raymond James cut its price target to $30 to $32, but rated the company as a “strong buy.”

How ET stock is placed

Energy Transfer stock is currently trading at $12.65, almost 4% and 11% below its 50-day and 200-day simple moving average levels, respectively. The large premium to both key levels indicates weakness in the stock. Energy Transfer stock has fallen below its 50-day levels in August and has been trading weakly since then. It is currently trading at an RSI (relative strength index) of 53, which indicates that the stock is neither overbought nor oversold.

Energy Transfer stock had fallen more than 25% from its 52-week high of $17.04 in November 2018. Its stock has gained almost 8% from its 52-week low of $11.68 in December 2018.

Analysts expect a massive upside of more than 65% from Energy Transfer stock. Analysts gave ET stock a mean target price of $20.84 against its current market price of $12.65. Along with its robust potential capital appreciation, Energy Transfer’s dividend yield makes it an attractive proposition from a total return perspective.

Energy Transfer stock is not an exception. There are many MLP (master limited partnership) stocks that have been weak despite strong earnings and distribution growth. To learn more, please read Top Midstream Energy Stocks: What Analysts Got Wrong.

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