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Zacks Investment Research downgraded Williams Partners L.P. to a Zacks Rank #5 (Strong Sell) on January 8.

Why the Downgrade?

Williams Partners L.P. has witnessed sharp downward estimate revisions after reporting disappointing third-quarter 2012 results. In fact, this natural gas midstream and pipeline partnership has delivered negative earnings surprises in the last 3 quarters with an average miss of 25.8%.

On October 31, 2012, Williams Partners reported third-quarter earnings per unit of 38 cents, missing the Zacks Consensus Estimate of 55 cents and the year-ago earnings of 91 cents.

Lower natural gas liquid margins in the partnership’s business during the quarter resulted in the drastic year-over-year deterioration. Higher costs related to the development of new businesses purchased earlier in the year were no less responsible.

Earnings were mainly aided by higher fee-based revenues from the partnership’s Susquehanna Supply Hub area and Ohio Valley Midstream area of the Marcellus Shale as well as in the recently acquired Ohio Valley Midstream system. However, these positives were more than offset by a 27.6% decline in the Midstream Gas & Liquids segment. The Gas Pipeline segment reported profits of $155.0 million, down 8.8% year over year.

The Zacks Consensus Estimate for 2012 decreased 1.9% to $2.08 per unit over the last 60 days. For 2013 also, most of the estimates were revised downward over the last 60 days, sinking the Zacks Consensus Estimate by 3.5% to $2.45 per share.

Other Stocks to Consider

Not all energy stocks are performing as poorly as Williams Partners. The following energy stocks with favorable Zacks Rank are performing well and are worth considering. The stocks of CNOOC Ltd and Lone Pine Resources Inc. are worth considering. Both carry a Zacks Rank #1 (Strong Buy).

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