) reported soft second quarter 2012 results, owing to challenging
natural gas market conditions along with higher acquisition related
For the second quarter, Williams' earnings per share, excluding
special items, came in at 22 cents, in line with the Zacks
Consensus Estimate. Comparing year over year, earnings plunged
24.1% from 29 cents per share.
The company generated revenues of $1,846 million, missing our
forecast of $2,021 million. Quarterly sales also declined 7.0% from
the prior-year level of $1,984 million.
Total adjusted segment profit was $421 million in the quarter, down
23.2% year over year.
Williams reports its results in three segments (following the
spin-off of Exploration & Production unit): Williams Partners
that includes the company's 72% owned master limited partnership
Williams Partners L.P.
); Midstream Canada & Olefins; and Other.
This segment reported adjusted operating profit of $352 million in
the quarter, down from the year-ago level of $474 million. The drop
in performance was mainly hurt by deteriorating natural gas liquids
(NGL) prices coupled with rising expenses.
Midstream Canada & Olefins:
The segment registered quarterly adjusted operating profit of $68
million, lower than $72 million recorded in the second quarter of
2011. Reduced sales volumes and per-unit margins stemming from weak
Canadian NGL scenario impacted the quarter's results.
The segment's adjusted operating profit was $1 million, against $2
million in the prior-year quarter.
Capital Expenditure & Balance Sheet
During the quarter, Williams incurred a capital expenditure of $593
million, of which almost 82% was invested in Williams Partners. As
of June 30, 2012, the partnership had cash and cash equivalents of
about $679 million.
For 2012, Williams guided earnings per share in the range of
$1.05-$1.25 (indicating a mid-point of $1.15). The same for 2013 is
projected at $1.20-$1.55 (midpoint is $1.38). The influence of NGL
prices will likely pull down the earnings level in the next two
The company expects earnings in the range of $1.70-$2.20 (with a
mid-point of $1.95) for 2014. The forecasted figure is nearly 59%
higher than 2011's earnings of $1.23 per share. A favorable mix of
natural gas and ethylene spread is expected to boost William's
performance in 2014.
Tulsa, Oklahoma-based Williams expects to generate total adjusted
operating profit of $1,900 million to $2,225 million in 2012,
$2,125 million to $2,675 million in 2013 and $2,825 million to
$3,475 million in 2014.
Capital expenditure is projected to average $6,700 million for
2012, $3,600 million for 2013 and $2,600 million for 2014.
Williams plans to make a dividend payout of $1.20 per share for
2012, up about 55% from the 2011 levels. For 2013 and 2014,
dividend is expected to improve 20% each year to $1.44 and $1.75
per share, respectively, aided by benefits from the fee-based
business and the commencement of new projects.
We believe that the upside potential of Williams will remain
limited in the coming days and hence, we maintain a long-term
Neutral recommendation on the stock. Williams currently holds a
Zacks #3 Rank (short-term Hold rating).
WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis
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