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How is Williams Companies (WMB) Placed Ahead of Q3 Earnings?

Williams Companies' (WMB) Transmission & Gulf of Mexico segment comprising its Transco Pipeline and assets in the Gulf Coast area is likely to have performed well in the third quarter.

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This story originally appeared on Zacks

The Williams Companies, Inc. WMB is set to release third-quarter 2021 results on Monday Nov 1, after the closing bell.

- Zacks

The Zacks Consensus Estimate for the to-be-reported quarter’s profit is 28 cents per share and for revenues is $2.45 billion.

Against this backdrop, let’s consider the factors that are likely to impact the company’s September-quarter results.

Factors to Consider for Q3 Results

Adjusted EBITDA from the Transmission & Gulf of Mexico segment, which includes Williams’ crown jewel and the nation’s largest and the fastest growing natural gas pipeline system Transco, was $648 million in the second quarter. This reflected an improvement from the year-ago quarter’s income of $617 million. The uptick is most likely to have continued in the third quarter as well, courtesy of the gains in service revenues, healthy commodity margins and higher natural gas transmission service revenues related to the recent expansion projects.

The West unit comprising gathering and processing assets in the Western region of the United States delivered an adjusted EBITDA of $231 million in the June quarter, down 8.33% year over year. This outcome was due to weak service revenues, indicating slashed gathering volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee. The setback is most likely to have continued in the third quarter as well.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for Williams this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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

Earnings ESP: Williams has an Earnings ESP of -0.91%.

Zacks Rank: Williams carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, this Tulsa, OK-based energy player’sadjusted earnings per share (EPS) of 27 cents met the Zacks Consensus Estimate. Reported earnings were higher than the year-ago bottom line of 25 cents per share.

The bottom-line result can be attributed to higher-than-expected contributions from its two segments. Adjusted EBITDA from the West and the Northeast G&P units totaled $231 million and $409 million each, ahead of their respective Zacks Consensus Estimate of $228 million and $402 million.

However, results were partially offset by lower-than-anticipated contribution from the Transmission & Gulf of Mexico segment. Adjusted EBITDA from the segment summed $648 million, falling short of the Zacks Consensus Estimate of $669 million.

This energy infrastructure provider’s quarterly revenuesof $2.28 billion also missed the Zacks Consensus Estimate by 9.87%. However, the same increased from the year-ago figure of $1.78 billion.

As far as earnings surprises are concerned, this midstream player shows a mixed record with its bottom line having topped the Zacks Consensus Estimate once in the last four quarterly reports, lagging the same just once while meeting the mark on the remaining two occasions. The average surprise is 5.47%. This is depicted in the graph below:

Stocks to Consider

While earnings outperformance looks uncertain for Williams this season, here are some firms worth considering from the energy space, which according to our model, have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

Whiting Petroleum Corporation WLL has an Earnings ESP of +5.63% and a Zacks Rank #1, currently. The firm is scheduled to release earnings on Nov 4.

Targa Resources Corp. TRGP has an Earnings ESP of +15.01% and a Zacks Rank of 1 at present. The firm is scheduled to release earnings on Nov 4.

TC Energy Corporation TRP has an Earnings ESP of +2.53% and is presently Zacks #3 Ranked. The firm is scheduled to release earnings on Nov 5.



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