Can Williams Companies (WMB) Surprise Q3 Earnings?

Energy infrastructure provider Williams Companies (NYSE:WMB) is set to release its third-quarter 2016 results before the opening bell on Monday, Oct 31.

In the preceding three-month period, the Tulsa, OK-based company met earnings estimates owing to significant cost reductions and continued improvement in financial performance.

But coming to earnings surprise history, the company has a mixed record: its missed estimates in 2 of the last four quarters, resulting in an average negative surprise of 26.83%.

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Williams is a premier energy infrastructure provider in North America. The company boasts a widespread pipeline system and is one of the largest domestic natural gas transporters by volume. Hence, the company’s size and diversity are likely to drive earnings in the to-be-reported quarter.

The company’s midstream assets, which are less sensitive to commodity price fluctuations, help it maintain a steady stream of revenues and cash flows in spite of low natural gas prices.

Despite these positives, we remain concerned about the company’s high debt levels that make it vulnerable to an extended drop in commodity prices. The company’s exposure to commodity price volatility has also taken a toll on its volume and distribution growth potential.

Earnings Whispers

Our proven model does not conclusively show that Williams Companies will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -12.50%. This is because the Most Accurate estimate stands at 14 cents, while the Zacks Consensus Estimate is pegged higher, at 16 cents.

Zacks Rank: Williams Companies has a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Williams Companies, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

CONE Midstream Partners L.P. (NYSE:CNNX) has an Earnings ESP of +2.7% and a Zacks Rank #1. The partnership is expected to release earnings results on Nov 4. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Devon Energy Corp. (NYSE:DVN) has an Earnings ESP of +20.00% and a Zacks Rank #2. The partnership is anticipated to release earnings on Nov 1.

Comstock Resources Inc. (NYSE:CRK) has an Earnings ESP of +3.74% and a Zacks Rank #2. The company is likely to release earnings on Nov 8.

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