A month has gone by since the last earnings report for Williams Companies, Inc. (The) (WMB). Shares have added about 3.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Williams Companies, Inc. (The) due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Williams Companies Posts Weak Q4 Results
Williams Companies reported fourth-quarter 2018 adjusted earnings from continuing operations of 19 cents per share, missing the Zacks Consensus Estimate of 22 cents. The weaker-than-expected results can be attributed to impairment charges of $1.8 billion, which adversely affected its overall profits. The reported EPS was a penny lower than the prior-year figure of 20 cents per share.
For the quarter ended Dec 31, 2018, Williams reported revenues of $2,204 million, lagging the Zacks Consensus Estimate of $2,531 million. Further, the top line was a tad lower than the year-ago figure of $2,228 million.
Distributable cash flows came in at $748 million, up 19% from the year-ago quarter. Adjusted EBITDA came in at $1,197 million in the quarter under review compared with $1,160 million in the corresponding period of 2017.Cash flow from operations totaled $962 million compared with $858 million in the prior-year period. Higher revenues from Transco projects drove cash flow in the quarter. Other expansionary projects, namely Atlantic Sunrise project and Gulf Connector, will keep up the cash flow momentum in the coming periods.
Atlantic-Gulf: This segment, comprising Williams’ Transco Pipeline and properties in the Gulf Coast region, generated adjusted EBITDA of $529 million compared with $433 million recorded in the year-ago quarter. Transco’s “Big 5” expansion projects (Gulf Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside II), which became functional in 2017 and 2018, drove the improved performance of the company.
West: The segment, including Northwest pipeline and operations in various regions such as Colorado, Mid-Continent, Haynesville Shale, among others, delivered adjusted EBITDA of $358 million, lower than $481 million recorded in the year-ago quarter. Impairment charges incurred in some of the gathering assets in the Barnett shale impacted the results.
Northeast G&P: This segment engages in natural gas gathering and processing, along with NGL fractionation business in Marcellus and Utica shale regions. The segment generated adjusted EBITDA of $304 million, up 2% from the corresponding quarter of last year. Higher volumes from Susquehanna, Utica and Ohio River systems led to the improved results.
Others: The segment posted adjusted EBITDA of 6 million compared with $8 million reported in the fourth quarter of 2017.
Total costs and expenses increased 19% from $2,383 million a year ago to $2,838 million in the reported quarter. The increased costs were primarily driven by impairment charges and higher product expenses.
Capital Expenditure & Balance Sheet
During the reported quarter, Williams’ capital expenditure was $597 million. Full-year capex amounted to $3,256 million. The company had cash and cash equivalents of $168 million as of Dec 31, 2018. Its long-term debt was $22,367 million, representing a debt-to-capitalization ratio of 60.5%.
Williams anticipates adjusted EBITDA for 2019 in the band of $4,850-$5,150 million, with distributable cash flow within $2,900-$3.300 million. The coverage ratio is expected to be around 1.68. Growth capex is expected in the band of $2.7-$2.9 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 11.93% due to these changes.
At this time, Williams Companies, Inc. (The) has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Williams Companies, Inc. (The) has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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