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Williams' (WMB) Q2 Earnings Beat, Revenues Miss Estimates

Zacks Equity Research

Williams Companies, Inc. WMB reported second-quarter 2019 adjusted earnings per share (EPS) from continuing operations of 26 cents, surpassing the Zacks Consensus Estimate of 23 cents. Strong contribution from its Atlantic-Gulf and Northeast G&P segments led to the outperformance. The reported EPS was higher than the prior-year figure of 17 cents.

For the quarter ended Jun 30, the company reported revenues of $2,041 million, lagging the Zacks Consensus Estimate of $2,062 million and decreasing from the year-ago figure of $2,091 million.

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

Key Takeaways

Distributable cash flows came in at $867 million, up 36.1% from the year-ago quarter. Adjusted EBITDA came in at $1,241 million in the quarter under review compared with $1,110 million in the corresponding period of 2018. Cash flow from operations totaled $1,069 million compared with $891 million in the prior-year period. Higher revenues from Transco projects drove cash flow in the quarter.

Segmental Analysis

Atlantic-Gulf: This segment, comprising Williams’ Transco Pipeline and properties in the Gulf Coast region, generated adjusted EBITDA of $559 million compared with $456 million recorded in the year-ago quarter. The improved performance of the company was driven by Transco expansion projects — including Atlantic Sunrise and Gulf Connector — that became functional in October 2018 and January 2019, respectively.

West: The segment, including the Northwest pipeline and operations in various regions such as Colorado, Mid-Continent and Haynesville Shale, among others, delivered adjusted EBITDA of $356 million, lower than $389 million recorded in the year-ago quarter. Lower commodity margins impacted the segment’s results.

Northeast G&P: This segment engages in natural gas gathering and processing, along with the NGL fractionation business in Marcellus and Utica shale regions. The segment generated adjusted EBITDA of $319 million, up 25% from the corresponding quarter of last year. Increased gathering volumes from the Susquehanna Supply Hub, and higher returns from investments in Marcellus and Bradford systems drove the results.

Others: The segment posted adjusted EBITDA of 7 million compared with $10 million in second-quarter 2018.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses decreased 8% to $1,543 million from $1,681 million a year ago due to lower product and depreciation expenses.

During the reported quarter, Williams’ total capital expenditure was $702 million. As of Jun 30, the company had cash and cash equivalents of $806 million, and a long-term debt of $20,711 million, representing a debt-to-capitalization ratio of 54.8%.

2019 Guidance Reiterated

The company maintained its 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 band of 83 cents to $1.07.

Zacks Rank and Key Picks

Williams currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the same industry are TC PipeLines, LP TCP, MPLX LP MPLX and Oasis Midstream Partners LP OMP, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

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