Williams Misses Earnings and Rev
Earnings per share – excluding special items – came in at 22 cents, below the Zacks Consensus Estimate of 24 cents and also down from the year-ago period adjusted profit of 39 cents. Revenues of $1,810.0 million were down 10.4% from the first quarter of 2012 and were also short of our projection of $2,036.0 million.
Williams Partners: This segment reported adjusted operating profit of $450.0 million in the quarter, down from the year-ago level of $552.0 million. Segment performance was hurt by deteriorating ethane, propane and butane prices, coupled with rising expenses, which was partially offset by increased margin of ethylene in Geismar.
Williams NGL & Petchem Services: The unit registered a quarterly adjusted operating profit of $36.0 million, lower than $40.0 million recorded in the first quarter of 2012. Higher cost related to operation and maintenance and also the depreciation expenses for the Boreal pipeline, lowered the quarter results.
The segment incurred adjusted loss of $5.0 million, against the prior-year quarter profit of $6.0 million. Gain of roughly $53 million from the sale of investment in Venezuela-based Accroven was included in the segment profit for the first quarter of 2012.
Capital Expenditure & Balance Sheet:
During the quarter, Williams’ capital expenditure was $713.0 million.
As of Mar 31, 2013, the company had long-term debt of $10,610.0 million, representing a debt-to-capitalization ratio of 68.9%. Williams has a current cash balance of about $702.0 million.
For 2013, Williams has lowered its guidance for earnings per share to 73 cents, while for 2014 and 2015, the company projected earnings per share to be $1.30 and $1.55. The influence of lower expected processing margins of NGL and lower transportation volumes of ethane will likely put pressure on the company’s earnings in the next two years.
Williams expects to generate total adjusted operating profit of $1,780.0 million in 2013, $2,613.0 million in 2014 and $3,200.0 million in 2015.
Capital and investment expenses are projected to be $4,395.0 million in 2013, $3,220.0 million for 2014 and $2,575.0 million for 2015.
Moreover, Williams expects the growth of its adjusted operating profit including depreciation and amortization to exceed 60% between 2013 and 2015.
Williams also suggests raising the dividend payout by 20% annually by 2013 to 2015
Stocks to Consider:
Williams currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other energy production/pipeline entities like EQT Midstream Partners LP (EQM), SemGroup Corp. (SEMG) and Oiltanking Partners LP (OILT) as attractive investments. EQT Midstream and SemGroup retain a Zacks Rank #1 (Strong Buy) while Oiltanking sports a Zacks Rank #2 (Buy).
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