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Williams (WMB) Q2 Earnings Match Estimates, Sales Miss Mark

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The Williams Companies, Inc. (WMB - Free Report) reported second-quarter 2021 adjusted earnings per share (EPS) of 27 cents, meeting the Zacks Consensus Estimate. Reported earnings were higher than the year-ago bottom line of 25 cents per share.

The latest 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, the 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.

For the quarter ended Jun 30, the company’s revenues of $2.28 billion missed the Zacks Consensus Estimate by 9.87%. However, the same increased from the year-ago figure of $1.78 billion.

Takeaways

Adjusted EBITDA was $1.432 billion in the quarter under review, reflecting an increase of 6% from the level in the corresponding period of 2020. Cash flow from operations totaled $1.06 billion compared with $1.14 billion in the prior-year period.

Segmental Analysis

Transmission & Gulf of Mexico: Comprising Williams’ massive Transco pipeline system and the Northwest Pipeline, the segment generated adjusted EBITDA of $648 million, higher than the year-ago quarter’s $617 million. Gains in service revenues, healthy commodity margins and higher natural gas transmission service revenues related to recent expansion projects drove the results.

West: This segment includes gathering and processing assets in the Western region of the United States. It delivered an adjusted EBITDA of $231 million, which is 8.33% lower than $252 million recorded in the year-earlier quarter. Results were impacted by reduced service revenues, indicating slashed gathering volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee.

Northeast G&P: Engaged in natural gas gathering and processing along with the NGL fractionation business in Marcellus and Utica shale regions, the segment generated an adjusted EBITDA of $409 million, up 12.7% from the prior-year quarter’s $363 million. Increased gathering volumes on its Bradford and Marcellus South systems, and higher equity-method investment contributions boosted the results.

Costs, Capex & Balance Sheet

In the reported quarter, total costs and expenses increased 44% to $1.68 billion from $1.17 billion a year ago, primarily due to higher product expenses, operating and maintenance expenses as well as depreciation and amortization expenses.

Williams’ total capital expenditure was $460 million in the second quarter, up from $363 million a year ago. As of Jun 30, 2021, the company had cash and cash equivalents worth $1.2 billion and a long-term debt of $21.1 billion with a debt-to-capitalization of 64.7%.

2021 Guidance

The company projects full-year adjusted EBITDA at the upper end of the previously raised guided range of $5.2-$5.4 billion. It reiterates its growth capital spending in the band of $1-$1.2 billion. It expects to generate a positive free cash flow, which will allow it to maintain its financial stability.

Zacks Rank & Key Picks

Williams currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matador Resources Company (MTDR - Free Report) , Devon Energy Corporation (DVN - Free Report) and Continental Resources, Inc. , each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


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