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Key Factors to Impact Williams Companies' (WMB) Q1 Earnings

Nilanjan Choudhury

The Williams Companies Inc. WMB is scheduled to release first-quarter 2019 results after the closing bell on Wednesday, May 1. The current Zacks Consensus Estimate for the quarter under review is a profit of 24 cents per share on revenues of $2.4 billion.

In the preceding three-month period, the Tulsa, OK-based energy infrastructure provider missed the consensus mark by 13.6% to impairment charges of $1.8 billion.

As far as earnings surprises are concerned, the midstream player has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below.

Williams Companies, Inc. (The) Price and EPS Surprise

 

Williams Companies, Inc. (The) Price and EPS Surprise | Williams Companies, Inc. (The) Quote

Investors are keeping their fingers crossed and hoping that the company can surpass earnings estimate this time around. However, our model indicates that Williams might not beat on earnings in the to-be-reported quarter.

Let’s delve deeper and find out the factors impacting the results.

Factors to Consider This Quarter

Williams’ ‘Atlantic-Gulf’ and ‘Northeast G&P’ segments — which collectively represents around 65% of the company’s adjusted EBITDA — could post strong results in the upcoming quarter. This would magnify Williams’ chances of notching up a quarterly beat.

Thanks to the expansion projects around Transco (the country's largest gas transmission system and Williams’ core project) being placed into service in over the past two years and the additional volumes from these takeaway infrastructures on the back of record drilling activity, the company is likely to experience continued strength in revenues. In particular, the completion of the Atlantic Sunrise project – the biggest expansion project in the history of Transco – is expected to provide substantial incremental fee-based revenue and drive EBITDA growth.

On the other hand, the Northeast G&P unit is set to benefit from higher volumes triggered by rising natural gas production from Marcellus and Utica shales.

However, Williams’ extensive natural gas exposure raises its sensitivity to the commodity’s price. In particular, lower gas prices in the first quarter is likely to have an adverse impact on the volumes and distribution growth potential at Williams Partners, the company's largest income generating business segment.

What Does Our Model Say?

Our proven model too does not conclusively predict that Williams will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -2.82%.

Zacks Rank: Williams currently has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

While earnings beat looks uncertain for Williams, here are some companies from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

Apache Corporation APA has an Earnings ESP of +6.67% and a Zacks Rank #2. The company is anticipated to release earnings on May 1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Devon Energy Corp. DVN has an Earnings ESP of +7.80% and a Zacks Rank #2. The company is anticipated to release earnings on Apr 30.

CNX Resources Corp. CNX has an Earnings ESP of +1.42% and a Zacks Rank #3 (Hold). The firm is expected to release earnings on Apr 30.

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