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Williams (WMB) Q1 Earnings Beat Estimates, Increase Y/Y

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The Williams Companies, Inc. (WMB - Free Report) reported first-quarter 2021 adjusted earnings per share (EPS) of 35 cents, beating the Zacks Consensus Estimate of 28 cents as well as the year-ago quarter’s earnings of 26 cents.

This outperformance can be attributed to higher-than-expected contributions from its two segments. Precisely, adjusted EBITDA from the West and the Northeast G&P units totaled $315 million and $402 million each, ahead of their respective Zacks Consensus Estimate of $247 million and $397 million.

Also, for the quarter ended Mar 31, the company’s revenues of $2.61 billion beat the Zacks Consensus Estimate by 22.71% and also increased from the year-ago figure of $1.9 billion.

Takeaways

Adjusted EBITDA was $1.4 billion in the quarter under review, reflecting an increase of 12.1% from the corresponding period of 2020. Cash flow from operations totaled $915 million compared with $787 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 the Northwest Pipeline, the segment generated adjusted EBITDA of $660 million, lower than the year-ago quarter’s $669 million. Despite marginal gains in service revenues, commodity margins and investee EBITDA, the unit’s performance was offset by higher operating and administrative expenses.

West: This segment includes gathering and processing assets in the Western region of the United States. It delivered adjusted EBITDA of $315 million, which is 45.8% higher than $216 million recorded in the year-earlier quarter. The improved results were driven by higher product marketing margins resulting from elevated prices and the absence of prior-year inventory effects plus lower operating and administrative expenses.

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 an adjusted EBITDA of $402 million, up 8.7% from the prior-year quarter’s $370 million. Increased gathering volumes on its Bradford and Marcellus South systems and higher equity-method investments contributions drove the results.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses increased 26.4% to $1.9 billion from $1.5 billion a year ago, primarily due to higher product expenses.

Williams’ total capital expenditure was $277 million in the first quarter, down from $284 million a year ago. As of Mar 31, 2021, the company had cash and cash equivalents of $1.13 billion and a long-term debt of $21.1 billion with a debt-to-capitalization of 64.3%.

2021 Guidance

The company updated full-year adjusted EBITDA to the band of $5.2-$5.4 billion from the prior guided range of $5.05-$5.35 million. It reiterates its growth capital spending in the band of $1-$1.2 billion. It expects to generate positive free cash flow, which will allow it to maintain financial stability.

Zacks Rank & Key Picks

Williams currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Whiting Petroleum Corporation (WLL - Free Report) , Diamondback Energy, Inc. (FANG - Free Report) and Continental Resources, Inc. (CLR - Free Report) , each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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