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Williams Companies Beats on Q4 Earnings

Zacks Equity Research

North American energy firm, Williams Companies Inc. (WMB) reported better-than-expected fourth-quarter 2013 earnings, primarily owing to increased fee-based revenues.

Earnings from continuing operations – excluding special items – came in at 22 cents per share, above the Zacks Consensus Estimate of 21 cents.

However, the figure decreased 12.0% from the year-ago adjusted profit of 25 cents per share (from continuing operations). Reduced natural gas liquid (NGL) margins, plant shut down activities along with increased operating and maintenance expenses affected the results.

Revenues of $1,660.0 million were down 11.2% from fourth-quarter 2012 and also fell short of the Zacks Consensus Estimate of $1,681.0 million. Lower product sales in the Williams Partners business unit affected the results.

For the year ended Dec 31, 2013, Williams Companies reported income from continuing operations (excluding non-operating items) of 82 cents per share, which surpassed the Zacks Consensus Estimate. However, the figure decreased from the year-ago adjusted figure of $1.11 per share. Revenues came in at $6,860.0 million, lower than $7,486.0 million reported in the year- ago period.

Segmental Analysis

Williams Partners: This segment reported adjusted operating profit of $485.0 million in the quarter, up 8.0% from $449.0 million in the year-ago quarter. Improved fee-based revenues aided the results, which was however partially offset by decreased NGL margins.

Williams NGL & Petchem Services: The unit registered quarterly adjusted operating profit of $2.0 million, substantially down from $27.0 million in the fourth quarter of 2012. The results were hurt by a scheduled plant shutdown owing to maintenance activities.

Access Midstream Partners: The segment reported an adjusted operating profit of $21.0 million.

Other: The segment posted adjusted loss of $4.0 million, which narrowed from the year-ago quarter’s loss of $12.0 million.

Operating and Maintenance Cost

Operating and Maintenance expenses were recorded at $277.0 million, up 6.1% from $261.0 million in the fourth quarter of 2012.

Capital Expenditure & Balance Sheet

During the quarter, Williams Companies’ capital expenditure stood at $1,030.0 million. As of Dec 31, 2013, the company had long-term debt of $11,353.0 million, representing a debt-to-capitalization ratio of 70.4%. Williams Companies has a cash balance of about $681.0 million.  

Guidance

For 2014, Williams Companies guided adjusted earnings per share in the range of $1.00–$1.20 (indicating a mid-point of $1.10). The same for 2015 is projected between $1.35 and $1.65 (mid-point $1.50).

Williams Companies expects to generate total adjusted operating profit of $2,200.0–$2,600.0 million in 2014 and $2,820.0−$3,320.0 million in 2015.

Capital and investment expenses are projected at $4,160.0–$5,040.0 million for 2014 and $3,200.0–$4,010.0 million for 2015.

Williams Companies maintained its annual dividend payout growth projection at 20% for 2014 and 2015 respectively. The company believes that significant increase in cash flows from its Williams Partners and Access Midstream Partners business units will aid dividend growth.

Stocks to Consider

Williams Companies currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the oil production and pipeline sector like Cheniere Energy Partners LP (CQP), American Midstream Partners LP (AMID) and Atlas Energy LP (ATLS). Cheniere Energy Partners sports a Zacks Rank #1 (Strong Buy), while American Midstream Partners and Atlas Energy hold a Zacks Rank #2 (Buy).

Read the Full Research Report on WMB
Read the Full Research Report on A^MID
Read the Full Research Report on ATLS
Read the Full Research Report on CQP


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