1 Aug

Could Williams Companies’ Q2 Results Help Its Stock?

WRITTEN BY Vineet Kulkarni

Natural gas infrastructure giant Williams Companies (WMB) released its second-quarter results yesterday after markets closed. Its adjusted EPS rose 53% YoY (year-over-year) to $0.26 in the quarter, beating analysts’ estimate. Williams’s Atlantic-Gulf and Northeast G&P (gathering and processing) segments boosted its earnings.

In the second quarter, Williams’s total revenue fell more than 2% YoY to $2.04 billion, missing analysts’ estimate. The company’s distributable cash flow rose 36% YoY to $867 million. Meanwhile, its dividend coverage ratio was 1.88x. A higher coverage ratio generally indicates a company can pay consistent or growing dividends.

Could Williams Companies’ Q2 Results Help Its Stock?

Williams Companies’ earnings by segment

Williams’s Atlantic-Gulf adjusted EBITDA rose 22% YoY in the second quarter to $559.0 million. The company’s Atlantic Sunrise and Gulf Connector Transco pipeline expansion projects drove that growth. Its West segment continued to falter in the second quarter, with its adjusted EBITDA falling 8% YoY to $356.0 million. Natural gas liquid prices stayed low in Q2, dragging down the West segment’s earnings.

Northeast G&P’s adjusted EBITDA rose 25% YoY to $319.0 million. The earnings were boosted by larger gathering volumes from the Susquehanna Supply Hub and Utica Shale. Williams president and CEO Alan Armstrong said, “Low gas prices will continue to incentivize demand growth, and demand for low cost power generation, LNG exports and new industrial loads will grow even faster in the second half of the year.”

Earnings guidance

This year, Williams expects its adjusted EBITDA to grow about 7% YoY to $4.85 billion–$5.15 billion. The company lowered its planned expenses for growth projects from $2.8 billion to $2.4 billion.

Williams stock has weakened substantially and has fallen 15% in the last two weeks. Its relative strength index score of 14 suggests the stock is oversold.

Of the 21 Reuters-surveyed analysts tracking WMB, two recommend “hold,” ten recommend “buy,” nine recommend “strong buy,” and none recommend “sell.” Their mean 12-month price target of $31.50 for the stock implies it could rise 28% from its July 31 price of $24.60. Midstream giant Kinder Morgan (KMI) reported its second-quarter earnings on July 17. To learn more, read Why Kinder Morgan Stock Fell After Its Q2 Earnings.

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