It has been about a month since the last earnings report for Williams Companies, Inc. (The) (WMB Quick QuoteWMB - Free Report) . Shares have added about 5.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is The Williams Companies 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 Q1 Earnings Beat Estimates, Revenues Miss

The Williams Companies reported first-quarter 2024 adjusted earnings per share of 59 cents, which beat the Zacks Consensus Estimate of 49 cents. The bottom line also improved from the year-ago period’s level of 56 cents. The Transmission & Gulf of Mexico, West, and Northeast G&P segments delivered strong year-over-year results, leading to the outperformance.

Williams’ revenues of $2.8 billion missed the Zacks Consensus Estimate of $2.9 billion and decreased from the year-ago quarter’s reported figure of $3.1 billion. The underperformance was due to lower service revenues and net losses from commodity derivatives on a year-over-year basis.

Key Takeaways

Adjusted EBITDA totaled $1.9 billion in the quarter under review, up 7.7 % year over year. Cash flow from operations amounted to $1.2 billion, down 18.5 % from the corresponding quarter of 2023.

Segmental Analysis

Transmission & Gulf of Mexico: The segment reported an adjusted EBITDA of $839 million, up 15.2% from the year-ago quarter’s level. This was primarily fueled by positive net contributions from the acquisitions of Gulf Coast Storage and Mountain West, as well as the expansion project for Regional Energy Access.

West: This segment focuses on the gathering and processing of assets in the Western United States. Adjusted EBITDA for this segment totaled $328 million, up 14.7% from the prior-year quarter’s level of $286 million. This strong performance can be credited to the acquisitions in the DJ Basin and better commodity margins.

Northeast G&P:  This segment registered an adjusted EBITDA of $504 million, up 3.9% from $485 million in the year-earlier quarter.  This increase can be linked to elevated rates and volumes at the Susquehanna Supply Hub, increased rates at Cardinal, and a greater contribution from the Aux Sable investment.

Gas & NGL Marketing Services: This unit generated an adjusted EBITDA of $189 million, down from the prior-year quarter’s level of $231 million.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses of $1.8 billion increased almost 2.2% from the year-ago quarter’s figure of $1.7 billion.

Total capital expenditure was $544 million compared with $545 million a year ago. As of Mar 31, 2024, the company had cash and cash equivalents of $667 million, and a long-term debt of $24.1 billion, with a debt-to-capitalization of 65.9%.

Williams' Infrastructure Expansion

The Oklahoma-based energy infrastructure provider completed the acquisition of six storage facilities totaling 115 Bcf capacity across Louisiana and Mississippi during this reported quarter. These facilities are strategically positioned to cater to the increasing demands of LNG exports and power generation.

Additionally, Williams inaugurated Transco's Carolina Market Link, enhancing its operational capabilities during the same time.

Moreover, Williams received the Federal Energy Regulatory Commission (“FERC”) notice during the quarter to proceed with Transco's Commonwealth Energy Connect. It also commenced construction on Transco's Southside Reliability Enhancement and Southeast Energy Connector projects.

The initial phase of Transco's Regional Energy Access, managed by Williams, consistently generated earnings during the quarter, and the second phase is scheduled to commence operations in the fourth quarter.

Furthermore, the oil and gas storage and transportation company obtained a FERC certificate for Transco's Alabama-Georgia Connector and Texas to Louisiana Energy Pathway. The company also filed a FERC application for Transco's Southeast Supply Enhancement project, aimed at enhancing transmission capacity by approximately 1.6 Bcf/d. Additionally, Williams is actively executing various other transmission, gathering, processing and Deepwater Gulf of Mexico projects.

Guidance

The company anticipates adjusted EBITDA in the range of $6.8 billion to $7.1 billion in the top half of 2024. 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 revision have trended downward during the past month.

VGM Scores

At this time, The Williams Companies has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The Williams Companies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.