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Is Debt Overshadowing Williams' (WMB) Decent Q2 Earnings?
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We issued an updated research report on Williams Companies Inc. (WMB - Free Report) on Aug 10, 2016. The company’s large-scale value-creating projects position it for strong returns even in a low commodity price environment. The positives led the company to report decent second-quarter 2016 earnings. However, Williams Companies’ high debt level has been a concern.
This is reflected in Williams Companies’ current Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Williams Companies’ midstream assets, which are less sensitive to commodity prices, help it to maintain a steady stream of revenue and cash flow even if natural gas prices stay low.
Moreover, the company has been able to counter the challenging macro environment and improve its economics on the back of certain strategic initiatives. These include cost reduction, the exercise of capital discipline, efficiency gains and consistent execution. These are likely to have backed the company’s adjusted earnings from continuing operations of 19 cents per share, in line with the Zacks Consensus Estimate. Moreover, the bottom line improved from the prior-year figure of 15 cents per share.
We appreciate the company’s recently announced decision to divest its Canadian businesses. Williams Companies and Williams Partners have decided to divest their Canadian businesses to Inter Pipeline Ltd for a total consideration of $1.03 billion. We believe that the agreement will help the players to finance a considerable part of their growth projects like expanding the far-reaching pipeline networks. The proceeds will also be utilized to lower debts under credit facilities.
The high debt level is a matter of concern for Williams Companies, which is vulnerable to an extended drop in commodity prices. As of Jun 30, 2016, the company had long-term debt of $24,394 million, which represents a debt-to-capitalization ratio of 84%.
On top of that, the termination of the Energy Transfer Equity LP merger deal – against which Williams has appealed – is a major dampener for the company and is likely to substantially affect its shareholders. Most importantly, the deal cancellation compelled Williams Companies to slash its quarterly dividend by almost 69%.
Stock to Consider
A better-ranked player in the energy sector is North Atlantic Drilling Limited . The company carries a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Is Debt Overshadowing Williams' (WMB) Decent Q2 Earnings?
We issued an updated research report on Williams Companies Inc. (WMB - Free Report) on Aug 10, 2016. The company’s large-scale value-creating projects position it for strong returns even in a low commodity price environment. The positives led the company to report decent second-quarter 2016 earnings. However, Williams Companies’ high debt level has been a concern.
This is reflected in Williams Companies’ current Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Williams Companies’ midstream assets, which are less sensitive to commodity prices, help it to maintain a steady stream of revenue and cash flow even if natural gas prices stay low.
Moreover, the company has been able to counter the challenging macro environment and improve its economics on the back of certain strategic initiatives. These include cost reduction, the exercise of capital discipline, efficiency gains and consistent execution. These are likely to have backed the company’s adjusted earnings from continuing operations of 19 cents per share, in line with the Zacks Consensus Estimate. Moreover, the bottom line improved from the prior-year figure of 15 cents per share.
We appreciate the company’s recently announced decision to divest its Canadian businesses. Williams Companies and Williams Partners have decided to divest their Canadian businesses to Inter Pipeline Ltd for a total consideration of $1.03 billion. We believe that the agreement will help the players to finance a considerable part of their growth projects like expanding the far-reaching pipeline networks. The proceeds will also be utilized to lower debts under credit facilities.
The high debt level is a matter of concern for Williams Companies, which is vulnerable to an extended drop in commodity prices. As of Jun 30, 2016, the company had long-term debt of $24,394 million, which represents a debt-to-capitalization ratio of 84%.
On top of that, the termination of the Energy Transfer Equity LP merger deal – against which Williams has appealed – is a major dampener for the company and is likely to substantially affect its shareholders. Most importantly, the deal cancellation compelled Williams Companies to slash its quarterly dividend by almost 69%.
Stock to Consider
A better-ranked player in the energy sector is North Atlantic Drilling Limited . The company carries a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>