Can Williams Companies (WMB) Pull a Surprise in Q4 Earnings?

Energy infrastructure provider Williams CompaniesWMB is set to release fourth-quarter 2016 results after the closing bell on Wednesday, Feb 15.

In the preceding three-month period, the Tulsa, OK-based company delivered a positive earnings surprise of 25.00%. The better-than-expected results were driven by significant cost reductions and continued improvement in financial performance.

But coming to earnings surprise history, the company has a mixed record. It missed estimates in two of the last four quarters with an average negative surprise of 34.86%.

Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

Williams is a premier energy infrastructure provider in North America. The company boasts a widespread pipeline system and is one of the largest domestic natural gas transporters by volume. Hence, the company's size and diversity are likely to drive earnings in the to-be-reported quarter.

Williams Companies, Inc. (The) Price and EPS Surprise

Williams Companies, Inc. (The) Price and EPS Surprise | Williams Companies, Inc. (The) Quote

The company's midstream assets, which are less sensitive to commodity price fluctuations, help it maintain a steady stream of revenues and cash flows in spite of low natural gas prices .

Additionally, Williams is increasing its quarterly dividend by 50% and has announced plans to increase its stake in the subsidiary - Williams Partners - to 72%. This is expected to position the company for sustainable, long-term growth as well as solidify the investment-grade credit ratings of its subsidiary.

Despite these positives, we remain concerned about the company's high debt levels that make it vulnerable to an extended drop in commodity prices. The company's exposure to commodity price volatility has also taken a toll on its volume and distribution growth potential.

We also believe that the termination of the Energy Transfer merger deal, which hit the company hard, will negatively affect its shareholders.

Earnings Whispers

Our proven model does not conclusively show that Williams Companies will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus mark.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 20 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter .

Zacks Rank: Williams Companies has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company's 0.00% Earnings ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Williams Companies, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

W&T Offshore, Inc. WTI is expected to release fourth-quarter earnings results on Mar 14. The company has an Earnings ESP of +73.91% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Sprague Resources LP SRLP has an Earnings ESP of +3.64% and a Zacks Rank #2. The partnership is anticipated to release fourth-quarter earnings on Mar 9.

Pioneer Natural Resources Company PXD has an Earnings ESP of +10.00% and a Zacks Rank #2. The company is likely to release fourth-quarter earnings on Feb 7.

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Williams Companies, Inc. (The) (WMB): Free Stock Analysis Report

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Sprague Resources LP (SRLP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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