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Williams Companies, Inc. (The) (WMB) Up 7.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Williams Companies, Inc. (The) (WMB - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.

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

Williams Q4 Earnings Outpace Estimate

The Williams Companies reported fourth-quarter 2023 adjusted earnings per share of 48 cents, which beat the Zacks Consensus Estimate of 47 cents. The outperformance was due to stronger-than-anticipated performance of the Transmission & Gulf of Mexico and Northeast G&P segments. However, the bottom line declined from the year-ago period’s level of 53 cents, due to lower-than-expected contributions from two major segments — Gas & NGL Marketing Services and West — during the reported quarter.

Williams’ revenues of $2.78 billion beat the Zacks Consensus Estimate of $2.76 billion. However, the top line decreased from the year-ago quarter’s reported figure of $2.93 billion due to lower product sales on a year-over-year basis.

Key Takeaways

Adjusted EBITDA totaled $1.72 billion in the quarter under review, down 3% year over year. Cash flow from operations amounted to $1.93 billion, up 58.2% from that recorded in the corresponding quarter of 2022.

Segmental Analysis

Transmission & Gulf of Mexico: The segment reported an adjusted EBITDA of $752 billion, up 7.4% from the year-ago quarter’s level. This was largely driven by higher service revenues.  Overall, the growth of Transmission & Gulf of Mexico was fueled by the advantages gained from the NorTex acquisition and expansion projects.

West: This segment focuses on the gathering and processing of assets in the Western United States. Adjusted EBITDA for this segment totaled $323 million, down 0.9% from the prior-year quarter’s level of $326 million. This underperformance can be attributed to lower NYMEX-based rates in the Barnett.

Northeast G&P:  This segment registered an adjusted EBITDA of $485 million, up 4.5% from $464 million recorded in the year-earlier quarter. This uptick in performance can be attributed to higher rates and volumes generated by the Ohio Valley, Cardinal and Susquehanna operations.

Gas & NGL Marketing Services: This unit generated an adjusted EBITDA profit of $69 million, down from the prior-year quarter’s level of $149 million.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses of $1.7 billion declined almost 8.1% from the year-ago quarter’s figure of $1.85 billion.

Total capital expenditure was $788 million compared with $806 million a year ago. As of Dec 31, 2023, the company had cash and cash equivalents of $2.2 billion, and a long-term debt of $23.4 billion, with a debt-to-capitalization of 65.3%.

Guidance

In 2024, WMB expects Adjusted EBITDA in the $6.8-$7.1 billion range. Additionally, it anticipates growth capex between $1.45 billion and $1.75 billion and maintenance capex between $1.1 billion and $1.3 billion. This includes $350 million allocated for emission reduction and modernization initiatives. The company expects a leverage ratio midpoint of 3.85x for 2024. WMB also expects to increase its dividend by 6.1% on an annualized basis to $1.90 per share in 2024, up from $1.79 in 2023

Looking ahead to 2025, the company expects Adjusted EBITDA between $7.2 billion and $7.6 billion, with growth capex in the band of $1.65-$1.95 billion and maintenance capex in the range of $750-$850 million. This includes $100 million for emission reduction and modernization initiatives.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Williams Companies, Inc. (The) has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. 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.

Performance of an Industry Player

Williams Companies, Inc. (The) belongs to the Zacks Oil and Gas - Production and Pipelines industry. Another stock from the same industry, Enbridge (ENB - Free Report) , has gained 4.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Enbridge reported revenues of $8.37 billion in the last reported quarter, representing a year-over-year change of -15.4%. EPS of $0.47 for the same period compares with $0.46 a year ago.

Enbridge is expected to post earnings of $0.59 per share for the current quarter, representing a year-over-year change of -6.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Enbridge. Also, the stock has a VGM Score of D.


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