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Williams Companies, Inc. (The) (WMB) Down 5.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Williams Companies, Inc. (The) (WMB). Shares have lost about 5.2% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Williams Q4 Earnings Beat Estimate

The Williams Companies reported fourth-quarter 2022 adjusted earnings per share of 53 cents, beating the Zacks Consensus Estimate of 47 cents. It also surpassed the year-ago period’s profit of 39 cents per share. The outperformance was due to lower costs and higher contributions from its two segments — Transmission & Gulf of Mexico, and West.

Meanwhile, in the quarter that ended Dec 31, Williams’ revenues of $2.9 billion underperformed the Zacks Consensus Estimate of $3.2 billion. It also came in below the year-ago quarter’s revenues of $3.3 billion. The underperformance could be attributed to decreased product sales.

Adjusted EBITDA was $1.8 billion in the quarter under review, indicating a 19.7% increase from the year-ago period. Cash flow from operations totaled $1.2 billion, up 7% from the prior-year quarter’s tally.

Segmental Analysis

Transmission & Gulf of Mexico: Comprising WMB’s massive Transco pipeline system and Northwest Pipeline, the segment generated adjusted EBITDA of $700 million, up 2.2% from the year-ago quarter. Overall, the growth of Transmission & Gulf of Mexico was driven by the acquisition of NorTex, Transco's Leidy South project, and improved resilience to natural disasters.

West: This segment focuses on the gathering and processing of assets in the Western region of the United States. It delivered an adjusted EBITDA of $326 million, 25.9% higher than $259 million recorded in the year-ago quarter.

The better outcomes were mainly due to higher net realized commodity-based rates and greater Haynesville gathering volumes comprising contributions from Trace Midstream acquired in April.

Northeast G&P: The unit generated adjusted EBITDA of $464 million, up almost 1% from the prior-year quarter’s $459 million.

The slight positive comparison was mainly because of Ohio Valley Midstream and gathering rate hikes. This was partly offset by lower Susquehanna volumes, higher operating and administrative costs, and lower net equity-investee contributions due to lower cost-of-service rates, lower volumes, and the impact of winter weather.

Gas & NGL Marketing Services: This unit generated adjusted EBITDA of $149 million, up significantly from the prior-year quarter’s $11 million.

This segment's performance improved on the back of steady commodity margins, which involved reducing inventory values to reflect lower market prices at the quarter’s end.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses of $1.85 billion were reduced by almost 20% compared with the year-ago quarter’s figure of $2.32 billion.

Williams’ total capital investment was $876 million, up from $371 million a year ago.

As of Dec 31, 2022, the company had cash and cash equivalents of $152 million and long-term debt of $21.9 billion, with a debt-to-capitalization of almost 61%.

2023 Guidance

WMB anticipates its 2023 adjusted EBITDA in the $6.4-$6.8 billion range, and growth capital spending in the $1.4-$1.7 billion range. Williams also expects to achieve a leverage ratio midpoint of 3.65X.

The company anticipates its maintenance capital expenditures between $750 million and $850 million.





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How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Williams Companies, Inc. (The) has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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