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Williams (WMB) Q4 Earnings Miss Estimates by a Penny, Up Y/Y

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The Williams Companies, Inc. (WMB - Free Report) reported fourth-quarter 2020 adjusted earnings per share (EPS) of 31 cents, missing the Zacks Consensus Estimate by a penny owing to hurricane-related disruptions and negative repercussions from customer bankruptcies.

However, the bottom line was above the year-earlier quarter's adjusted earnings of 24 cents on higher-than-expected contributions from all three segments. Precisely, adjusted EBITDA from the Transmission & Gulf of Mexico, West and the Northeast G&P units totaled $644 million, $277 million and $406 million, ahead of their respective Zacks Consensus Estimates of $641 million, $245 million and $386 million.

Meanwhile, for the quarter ended Dec 31, the company’s revenues of $2.1 billion beat the Zacks Consensus Estimate by 7.2% but decreased $15 million from a year ago.

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 $926 million, up 11.8% from the year-ago quarter’s $828 million. Adjusted EBITDA was $1.3 billion in the quarter under review, reflecting an increase of 4% from the corresponding period of 2019. Cash flow from operations totaled $1.1 billion compared with $991 million in the prior-year period. Favorable net working capital changes drove cash flow in the quarter.

Segmental Analysis

Transmission & Gulf of Mexico: Comprising Williams’ massive Transco pipeline system and Northwest Pipeline, the segment generated adjusted EBITDA of $644 million, essentially unchanged from the year-ago quarter. This unit’s performance was buoyed by lower costs and service revenue gains from the expansion projects around Transco (the country's largest gas transmission system and Williams’ core initiative) being placed into service over the past few years. These factors were offset by lower deferred revenues at the Gulfstar One project and the impact of shut-ins associated with hurricanes.  

West: This segment includes gathering and processing assets in the Western region of the United States. It delivered adjusted EBITDA of $277 million, which is 5.3% higher than $263 million recorded in the year-earlier quarter. The improved results were driven by higher service revenues and rates.

Northeast G&P: Engaged in natural gas gathering and processing along with the NGL fractionation business in Marcellus and Utica shale regions, the segment generated adjusted EBITDA of $406 million, up 7.7% from the prior-year quarter’s $377 million. A tight leash on operating and administrative costs and higher equity-method investments contributions drove the results.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses decreased 16% to $1.6 billion from $1.9 billion a year ago, primarily owing to lower product expenses.

Williams’ total capital expenditure was $423 million in the fourth quarter, up from $408 million a year ago. As of Dec 31, 2020, the company had cash and cash equivalents of $142 million and a long-term debt of $21.5 billion with a debt-to-capitalization ratio of 59.5%.

2021 Guidance

The company guided full-year adjusted EBITDA in the band of $5.05-$5.35 billion with growth capital spending in the range of $1-$1.2 billion. Adjusted EPS for the year is expected in the range of 99 cents to $1.23. Further, Williams expects to grow its dividend at an annual rate of 2.5% and aims toward a dividend coverage ratio of 1.85x at the midpoint of its 2021 guidance.

Zacks Rank & Stock Picks

Williams currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are PDC Energy (PDCE - Free Report) , Royal Dutch Shell (RDS.A - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . PDC Energy and Royal Dutch Shell sport a Zacks Rank #1 (Strong Buy), while Pioneer Natural Resources carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy has an expected earnings growth rate of 165.91% for the current year.  

Royal Dutch Shell has an expected earnings growth rate of 165.32% for the current year.

Pioneer Natural Resources has an expected earnings growth rate of 319.91% for the current year.

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