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North American energy firm, Williams Companies Inc. (WMB - Analyst Report) reported better-than-expected third-quarter 2013 earnings, owing to lower selling, general and administrative expenses.

Earnings per share (EPS) – excluding special items – came in at 19 cents, above the Zacks Consensus Estimate of 14 cents.

However, the EPS decreased by 24.0% from the year-ago adjusted profit of 25 cents due to drop in the natural gas liquid (NGL) and olefin margins.

Revenues of $1,623.0 million were down 7.4% from third-quarter 2012 and also fell short of the Zacks Consensus Estimate of $1,714 million. Lower product sales in the Williams Partners business unit affected the results.

Segmental Analysis

Williams Partners: This segment reported adjusted operating profit of $388.0 million in the quarter, down 12.6% from $444.0 million in the year-ago quarter.

Decreased olefin and NGL margins impacted the results. These factors were partially offset by reduced operating costs.

Williams NGL & Petchem Services: The unit registered quarterly adjusted operating loss of $2.0 million against $16.0 million profit in the third 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 $6.0 million.

Other: The segment posted adjusted profit of $3.0 million, as against the year-ago quarter of $1.0 million.

Expenses

Selling, general and administrative costs were recorded at $130.0 million, down 5.1% from $137.0 million in the third quarter of 2012.

Capital Expenditure & Balance Sheet

During the quarter, Williams’ capital expenditure was $1,012.0 million. As of Sep 30, 2013, the company had long-term debt of $10,359.0 million, representing a debt-to-capitalization ratio of 68.4%. Williams has a cash balance of about $732.0 million.

Guidance

For 2013, Williams guided EPS in the range of 80–85 cents (indicating a mid-point of 83 cents). The same for 2014 is projected between $1.00 and $1.20 (mid-point $1.10). For 2015, Williams projects EPS of $1.35 to $1.65 with a mid-point of $1.50.

Williams expects to generate total adjusted operating profit of $1,790.0–$1,900.0 million in 2013, $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 $4,100.0–$4,600.0 million for 2013, $4,350.0–$5,350.0 million for 2014 and $3,370.0–$4,350.0 million for 2015.

Williams maintained its previously-announced annual dividend payout growth of 20% from 2013 to 2015. The company believes that significant increase in cash flows from its Williams Partners and Access Midstream Partners units will aid dividend growth.

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 energy stocks like Baytex Energy Corp. (BTE - Snapshot Report), VOC Energy Trust (VOC - Snapshot Report) and Matador Resources Co. (MTDR - Snapshot Report) that offer better prospects. All the stocks sport a Zacks Rank #1 (Strong Buy).

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