Williams Companies, Inc.
) reported weak third quarter 2012 results, owing to lower
natural gas liquid (NGL) margins along with higher development
cost related to earlier acquisition.
For the third quarter, Williams' earnings per share, excluding
special items, came in at 25 cents, lagging the Zacks Consensus
Estimate of 27 cents. Comparing year over year, earnings plunged
16.7% from 30 cents per share.
The company generated revenues of $1,752 million missing the
Zacks Consensus Estimate of $2,081 million. Quarterly sales also
declined 11.2% from the prior-year level of $1,972 million.
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 $384 million
in the quarter, down from the year-ago level of $477 million.
Segment performance was mainly hurt by deteriorating NGL prices
coupled with rising expenses.
Midstream Canada & Olefins
: The segment registered quarterly adjusted operating profit of
$76 million, greater than $73 million recorded in the third
quarter of 2011. Enhanced Geismar ethylene margins, partially
offset by lower Canadian NGL margins, enhanced the quarter
: The segment's adjusted operating profit was $1 million, in line
with the prior-year quarter.
Capital Expenditure & Balance Sheet
During the quarter, Williams' capital expenditure was $730
million. As of September 30, 2012, the partnership had cash and
cash equivalents of about $996 million.
For fiscal 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 in the range of $1.05-$1.45 (midpoint is $1.25)
and for 2014 within the $1.45-$1.95 (midpoint is $1.70) range.
The influence of lower gas prices and disposition of Gulf Olefins
assets will likely pull down the earnings level in the next two
Williams expects to generate total adjusted operating profit of
$1,900 million to $2,150 million in 2012, $2,000 million to
$2,500 million in 2013 and $2,650 million to $3,250 million in
Capital expenditure is projected to be in the range of $6,325
million to $6,700 million in 2012, $3,485 million to $4,085
million in 2013 and $2,175 million to $2,875 million in 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.
Williams Partners entered into an agreement with Williams
Companies to purchase its 83% stake in Geismar olefins production
facility and refinery-grade propylene splitter for $2.264
billion. It will also acquire Williams' pipelines in the Gulf
region for $100 million.
We believe that the upside potential of Williams will remain
limited in the coming days and hence maintain a long-term Neutral
recommendation on the stock. Williams Companies currently holds a
Zacks #3 Rank (short-term Hold rating).
WILLIAMS COS (WMB): Free Stock Analysis
WILLIAMS PTNRS (WPZ): Free Stock Analysis
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