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Why Is Williams Companies (WMB) Down 5.7% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for Williams Companies, Inc. (WMB - Free Report) . Shares have lost about 5.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.

Williams Companies Q2 Earnings and Sales Lag Estimates

Williams Companies reported adjusted earnings from continuing operations of 13 cents per share missing the Zacks Consensus Estimate of 19 cents. Unfavorable changes in the income tax provision led to the weaker-than-expected results. Further, the bottom line also deteriorated from the prior-year figure of 19 cents per share. This was due to a favorable adjustment related to the reversal of a cumulative anticipatory foreign tax credit in the prior year quarter.

For the quarter ended Jun 30, 2017, Williams Companies reported revenues of $1,924 million, below the Zacks Consensus Estimate of $2,262 million. However, revenues increased from the year-ago quarter figure of $1,736 million thanks to higher contribution from Williams Partners. Revenues of Williams Partners were higher by 10.2% to $1,919 million in the quarter.

Segmental Analysis

Williams Partners: This segment reported adjusted operating profit of $1,104 million, up 3.7% from $1,065 million in the year-ago quarter. Absence of $ 341 million of impairment charges and higher fee-based revenues drove results.

Other: The segment posted adjusted operating profit of $9 million compared with the year-ago breakeven level. Results were mainly driven by the absence of $406 million of impairment charges. The results were partially offset by unfavorable adjustments related to the income tax provision.

Expenses Summary

The total cost and expenses decreased 30.6% to $1,543 million in the reported quarter compared with $2,224 million in the prior-year quarter. Reduced costs were mainly driven by the $777 million decrease in the impairment charges. The decrease in impairments includes the absence of $747 million of impairments related to Canadian operations.

Further, operating and maintenance costs (O&M) and Selling, General and Administrative Expenses (S, G&A) and depreciation costs also declined in the reported quarter. However, the product costs rose to $537 million in the quarter compared with the prior-year quarter figure of $401 million.

Capital Expenditure & Balance Sheet

During the reported quarter, Williams Companies’ capital expenditure was $545 million. As of Jun 30, 2017, the company had cash and cash equivalents of 1,198 million, as against $135 million in the year ago quarter. Long-term debt of the company was $21,325 million, representing a debt-to-capitalization ratio of 71.9%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three downward revisions in the current quarter.

VGM Scores

At this time, the stock has a subpar Growth Score of D, however its Momentum is lagging a lot with an F. Meanwhile, 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.

Zacks' style scores indicate that the company's stock is solely suitable for value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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