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Why Is Williams Companies, Inc. (The) (WMB) Down 3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Williams Companies, Inc. (The) (WMB - Free Report) . Shares have lost about 3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Williams Companies, Inc. (The) 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 drivers.

Williams Companies Posts Weak Q1 Results

Williams Companies reported first-quarter 2019 adjusted earnings from continuing operations of 22 cents per share, missing the Zacks Consensus Estimate of 24 cents. Lower contribution from its ‘West’ segment led to the underperformance. Nonetheless, the reported EPS was higher than the prior-year figure of 19 cents.

For the quarter ended Mar 31, the company reported revenues of $2,054 million, lagging the Zacks Consensus Estimate of $2,373 million and decreasing from the year-ago figure of $2,088 million.
 
Key Takeaways

Distributable cash flows came in at $780 million, up 8% from the year-ago quarter. Adjusted EBITDA came in at $1,216 million in the quarter under review compared with $1,135 million in the corresponding period of 2018. Cash flow from operations totaled $775 million compared with $694 million in the prior-year period. Higher revenues from Transco projects drove cash flow in the quarter.

Segmental Analysis

Atlantic-Gulf: This segment, comprising Williams’ Transco Pipeline and properties in the Gulf Coast region, generated adjusted EBITDA of $560 million compared with $466 million recorded in the year-ago quarter. Transco expansion projects — including Atlantic Sunrise and Gulf Connector — which became functional in October 2018 and January 2019, respectively, drove the improved performance of the company.

West: The segment, including Northwest pipeline and operations in various regions such as Colorado, Mid-Continent, Haynesville Shale, among others, delivered adjusted EBITDA of $346 million, lower than $406 million recorded in the year-ago quarter. Severe weather conditions resulted in a decline in volumes, translating into 12.7% lower revenues on a year-over-year basis. Further, lower commodity margins impacted the segment’s results.

Northeast G&P: This segment engages in natural gas gathering and processing, along with NGL fractionation business in Marcellus and Utica shale regions. The segment generated adjusted EBITDA of $302 million, up 21% from the corresponding quarter of last year. Increased gathering volumes from the Susquehanna Supply Hub, and higher returns from investments in Marcellus and Bradford systems drove the results.

Others: The segment posted adjusted EBITDA of 8 million compared with $13 million in first-quarter 2018.

Expenses Summary

In the reported quarter, total costs and expenses decreased 6.5% to $1,493 million from $1,597 million a year ago. Product, operating, depreciation and S&GA expenses declined in the quarter under review.

Capex & Balance Sheet

During the reported quarter, Williams’ total capital expenditure was $1,244 million. As of Mar 31, the company had cash and cash equivalents of $43 million, and a long-term debt of $20,703 million, representing a debt-to-capitalization ratio of 57%.

2019 Guidance Revised

The company maintained its adjusted EBITDA guidance in the band of $4,850-$5,150 million, with distributable cash flow within $2,900-$3,300 million. However, the company revised its adjusted EPS view for the year within 83 cents to $1.07 from the earlier projected range of 77 cents to $1.01. Growth capex is now expected in the band of $2.3-2.5 billion versus prior forecast of $2.7-$2.9 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Williams Companies, Inc. (The) has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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

Williams Companies, Inc. (The) has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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