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Williams (WMB) Q3 Earnings: Gas Price Rise to Offset Cost Woe?
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The Williams Companies, Inc. (WMB - Free Report) is set to release third-quarter 2018 results on Oct 31, after the closing bell. The Zacks Consensus Estimate for third-quarter earnings is pegged at 19 cents on revenues of $2,164 million.
In the last reported quarter, the Tulsa, OK-based company delivered better-than-expected earnings on the back of increased service revenues and NGL margins. However, the earnings surprise history of the firm is not that impressive. Williams has managed to surpass earnings estimates in just one of the trailing four quarters, with an average negative surprise of 6.08%.
Williams Companies, Inc. (The) Price and EPS Surprise
On a further discouraging note, the Zacks Consensus Estimate of 19 cents for the third quarter has been revised downward by a penny over the past seven days. However, the current estimate compares favorably with a profit of 15 cents per share in the third quarter of 2017. The Zacks Consensus Estimate for revenues also reflects a year-over-year improvement of 14.4%.
Let’s see how things are shaping up prior to the announcement.
Factors at Play
Williams’ extensive natural gas exposure raises its sensitivity to the commodity’s price. Natural gas fared well in the July-September quarter on the back of improving clean energy demand. The average monthly spot prices of the commodity in the respective months of third-quarter 2018 were $2.83 per Million Btu, $2.96 per Million Btu and $3.00 per Million Btu, representing healthier prices than third-quarter 2017.Improvement in natural gas prices is likely to have a positive effect on the company. The company’s midstream arm is likely to help it maintain a steady stream of revenues. We believe that the company could benefit from increasing volumes and processing margins from the Transco pipeline-expansion projects that came into service in 2017.
However, the company has been bearing the brunt of increased expenses since the past four quarters and the trend is likely to continue in the to-be-reported quarter as well, putting pressure on its earnings and financials. As it is, the company carries a leverage of around 70%, which restricts its financial freedom.Williams is also likely to be affected by lower throughput volumes due to its divestment of Geismar Plant and Canadian assets.
Earnings Whispers
Our proven model does not conclusively show that Williams is likely to beat estimates in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. That is not the case here as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.55%. This is because while the Zacks Consensus Estimate for earnings per share is pegged at 19 cents, the Most Accurate Estimate stands a penny lower at 18 cents.
Zacks Rank: Williams currently carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Though an earnings beat looks uncertain for Williams, here are a few firms from the energy space that you may want to consider. On the basis of our model, these have the right combination of elements to post an earnings beat in the quarter to be reported.
Archrock, Inc. (AROC - Free Report) has an Earnings ESP of +57.9% and carries a Zacks Rank #2. The firm is expected to report third-quarter earnings on Nov 1.
Enbridge Inc. (ENB - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. The firm is expected to release third-quarter earnings on Nov 2.
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It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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Image: Bigstock
Williams (WMB) Q3 Earnings: Gas Price Rise to Offset Cost Woe?
The Williams Companies, Inc. (WMB - Free Report) is set to release third-quarter 2018 results on Oct 31, after the closing bell. The Zacks Consensus Estimate for third-quarter earnings is pegged at 19 cents on revenues of $2,164 million.
In the last reported quarter, the Tulsa, OK-based company delivered better-than-expected earnings on the back of increased service revenues and NGL margins. However, the earnings surprise history of the firm is not that impressive. Williams has managed to surpass earnings estimates in just one of the trailing four quarters, with an average negative surprise of 6.08%.
Williams Companies, Inc. (The) Price and EPS Surprise
Williams Companies, Inc. (The) Price and EPS Surprise | Williams Companies, Inc. (The) Quote
On a further discouraging note, the Zacks Consensus Estimate of 19 cents for the third quarter has been revised downward by a penny over the past seven days. However, the current estimate compares favorably with a profit of 15 cents per share in the third quarter of 2017. The Zacks Consensus Estimate for revenues also reflects a year-over-year improvement of 14.4%.
Let’s see how things are shaping up prior to the announcement.
Factors at Play
Williams’ extensive natural gas exposure raises its sensitivity to the commodity’s price. Natural gas fared well in the July-September quarter on the back of improving clean energy demand. The average monthly spot prices of the commodity in the respective months of third-quarter 2018 were $2.83 per Million Btu, $2.96 per Million Btu and $3.00 per Million Btu, representing healthier prices than third-quarter 2017.Improvement in natural gas prices is likely to have a positive effect on the company. The company’s midstream arm is likely to help it maintain a steady stream of revenues. We believe that the company could benefit from increasing volumes and processing margins from the Transco pipeline-expansion projects that came into service in 2017.
However, the company has been bearing the brunt of increased expenses since the past four quarters and the trend is likely to continue in the to-be-reported quarter as well, putting pressure on its earnings and financials. As it is, the company carries a leverage of around 70%, which restricts its financial freedom.Williams is also likely to be affected by lower throughput volumes due to its divestment of Geismar Plant and Canadian assets.
Earnings Whispers
Our proven model does not conclusively show that Williams is likely to beat estimates in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. That is not the case here as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.55%. This is because while the Zacks Consensus Estimate for earnings per share is pegged at 19 cents, the Most Accurate Estimate stands a penny lower at 18 cents.
Zacks Rank: Williams currently carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Though an earnings beat looks uncertain for Williams, here are a few firms from the energy space that you may want to consider. On the basis of our model, these have the right combination of elements to post an earnings beat in the quarter to be reported.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +5.61% and a Zacks Rank #2. The firm is expected to release third-quarter earnings on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock, Inc. (AROC - Free Report) has an Earnings ESP of +57.9% and carries a Zacks Rank #2. The firm is expected to report third-quarter earnings on Nov 1.
Enbridge Inc. (ENB - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. The firm is expected to release third-quarter earnings on Nov 2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>