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Williams (WMB) Q1 Earnings & Revenues Outpace Estimates

The Williams Companies WMB reported first-quarter 2023 adjusted earnings of 56 cents per share, which beat the Zacks Consensus Estimate of 46 cents. The bottom line also outdid the year-ago period’s reported figure of 41 cents. The outperformance was due to higher-than-expected contributions from one major segment — Northeast G&P. Adjusted EBITDA from the segment totaled $470 million, which outpaced the Zacks Consensus Estimate of $453 million. The figure also increased 12.4% on a year-over-year basis.

Williams’ revenues of $3.1 billion in the reported quarter beat the Zacks Consensus Estimate of $2.8 billion. The top line also outperformed the year-ago quarter’s figure of $2.5 billion, which could be attributed to increased revenues from service.

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

 

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

Williams Companies, Inc. (The) price-consensus-eps-surprise-chart | Williams Companies, Inc. (The) Quote

Key Takeaways

Adjusted EBITDA was $1.79 billion in the quarter under review, an increase of 18.5% from the prior-year period. Cash flow from operations totaled $1.51 billion, up 39.8% from that recorded in the corresponding quarter of 2022.

Segmental Analysis

Transmission & Gulf of Mexico: The segment reported adjusted EBITDA of $728 million, up 4.4% from the year-ago quarter. This was largely driven by much higher service revenues from Transco’s recent in-service Leidy South expansion project.

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West: This segment registered an adjusted EBITDA of $286 million, 10% higher than $260 million recorded in the year-earlier quarter. The improvement resulted from contributions from Trace Midstream and the benefits of realized gains on natural gas hedges.

Northeast G&P: Adjusted EBITDA for this segment was $470 million, up 12.4% from the prior-year quarter’s $418 million. This uptick can be attributed to higher volumes at Ohio Valley Midstream, Marcellus South and Cardinal.

Gas & NGL Marketing Services: This unit generated an adjusted EBITDA of 231 million compared with $65 million in the year-ago quarter. The upside reflects higher commodity marketing margins and a $390-million net favorable change in unrealized gains/losses on commodity derivatives.

Costs, Capex & Balance Sheet

Total costs and expenses amounted to $1.72 billion in the reported quarter.

Total capital expenditure was $525 million compared with $316 million a year ago. As of Mar 31, 2023, the company had cash and cash equivalents of $477 million, and a long-term debt of $22.79 billion, with a debt-to-capitalization of 61.4%.

Guidance

WMB expects its full-year adjusted EBITDA to be $6.4-$6.8 billion. Growth capital spending is anticipated to be $1.6-$1.9 billion. Williams expects to achieve a leverage ratio mid-point of 3.65. This, along with the scope of generating a positive free cash flow after dividends and capital expenditure (excluding the Trace acquisition of approximately $950 million), offers financial flexibility. The dividend guidance for 2023 increased 5.3% on an annualized basis to $1.79 from $1.70 in 2022.

Zacks Rank and Key Picks

Currently, Williams carries a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC and Murphy USA MUSA, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

EPM is worth $219.16 million. The company currently pays investors $0.48 per share, or 7.38%, on an annual basis.

Evolution Petroleum currently has a forward P/E ratio of 6.07. In comparison, its industry has an average forward P/E of 7.50, which means that EPM is trading at a discount to the group.

AROC is valued at $1.55 billion. The company delivered an average earnings surprise of 26.27% for the last four quarters and its current dividend yield is 6.06%.

Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.

RNGR is valued at $183.61 million. In the past year, its shares have gained 13.8%.

Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means that RNGR is trading at a discount to the group.

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