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Why Is Williams Companies, Inc. The (WMB) Down 3.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Williams Companies, Inc. The (WMB - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Williams Companies, Inc. The due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Williams Reports Lower-Than-Expected Q4 Earnings

The Williams Companies 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.

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.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 5.49% due to these changes.

VGM Scores

At this time, Williams Companies, Inc. The has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Williams Companies, Inc. The has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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