Williams' (WMB) Q3 Earnings Beat, Revenues Miss Estimates

Williams Companies, Inc. WMB reported third-quarter 2019 adjusted earnings per share (EPS) from continuing operations of 26 cents, surpassing both the Zacks Consensus Estimate and the prior-year profit of 24 cents. Strong contribution from its Atlantic-Gulf and Northeast G&P segments led to this outperformance.

However, for the quarter ended Sep 30, the company’s revenues of $2 billion lagged the Zacks Consensus Estimate of $2.09 billion and also decreased 13% from $2.30 billion a year ago owing to weaker West segment sales.

Key Takeaways

Distributable cash flows came in at $822 million, up 8% from the year-ago number of $764 million. Adjusted EBITDA was $1,274 million in the quarter under review compared with $1,196 million in the corresponding period of 2018. Cash flow from operations totalled $858 million compared with $746 million in the prior-year period. Higher revenues from Transco expansion projects drove cash flow in the quarter.

Segmental Analysis

Atlantic-Gulf: Comprising Williams’ Transco Pipeline and properties in the Gulf Coast region, the segment generated adjusted EBITDA of $611 million, up 27.3% from $480 million in the year-ago quarter. The metric also beat the Zacks Consensus Estimate of $540 million. This improved performance was driven by Transco expansion projects including Atlantic Sunrise and Gulf Connector that became functional in October 2018 and January 2019, respectively.

West: This segment includes the Northwest pipeline and operations in various regions, such as Colorado, Mid-Continent and Haynesville Shale among others. It delivered adjusted EBITDA of $313 million, which is 26.2% lower than $424 million registered in the year-earlier quarter. The figure also missed the Zacks Consensus Estimate of $384 million. Lower natural gas liquid margins impacted the results.

Northeast G&P: Engaged in natural gas gathering and processing along with the NGL fractionation business in Marcellus and Utica shale regions, the segment generated adjusted EBITDA of $343 million, up 22% from the prior-year quarter’s $281 million. The same even surpassed the Zacks Consensus Estimate of $338 million. Expanded volumes from the Susquehanna Supply Hub and higher service revenues from Ohio Valley along with the acquisition of Utica East Ohio Midstream drove the results.

Others: Adjusted EBITDA of $7 million from this segment plunged 36.4% from $11 million in third-quarter 2018.

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

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

Williams Companies, Inc. (The) price-consensus-eps-surprise-chart | Williams Companies, Inc. (The) Quote

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses decreased 24% to $1,371 million from $1,802 million a year ago owing to lower product expenses.

Williams’ total capital expenditure was $850 million in the third quarter. As of Sep 30, the company had cash and cash equivalents of $247 million and a long-term debt of $20,719 million with a debt-to-capitalization ratio of 55.13%.

2019 Guidance Reiterated

The company reaffirmed its full-year adjusted EBITDA guidance in the band of $4,850-$5,150 million with distributable cash flow within $2,900-$3,300 million. Adjusted EPS view for the year is expected in the range of 83 cents to $1.07.

Zacks Rank & Key Picks

Williams has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Subsea 7 SA, Inc. SUBCY, Phillips 66 PSX and Sunoco LP SUN, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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