Is A Beat In Store For Williams (WMB) This Earnings Season?

We expect The Williams Companies Inc. (NYSE:WMB) to beat expectations when it reports second-quarter 2019 results after the closing bell on Wednesday, Jul 31. The current Zacks Consensus Estimate for the quarter under review is a profit of 23 cents per share on revenues of $2.2 billion.

In the preceding three-month period, the Tulsa, OK-based energy infrastructure provider missed the consensus mark by 8.3% on lower contribution from its ‘West’ segment.

As far as earnings surprises are concerned, the midstream player has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below.

Investors are keeping their fingers crossed and hoping that the company can surpass earnings estimate this time around. Thankfully, our model indicates that Williams might beat on earnings in the second quarter.

Let’s delve deeper and find out the factors impacting the results.

Why a Likely Positive Surprise?

Our proven model shows that Williams is likely to beat the Zacks Consensus Estimate this quarter as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and Zacks Rank #3 (Hold) or higher for increasing the odds of an earnings beat.

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

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.60%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Williams currently has a Zacks Rank of 3, which, when combined with a positive ESP, makes us confident of earnings beat.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

What is Driving the Better-Than-Expected Earnings?

Williams’ ‘Atlantic-Gulf’ and ‘Northeast G&P’ segments — which collectively represents around 70% of the company’s adjusted EBITDA — could post strong results in the upcoming quarterly release. This would magnify Williams’ chances of notching up a quarterly beat.

Thanks to the expansion projects around Transco (the country's largest gas transmission system and Williams’ core project) being placed into service in over the past two years and the additional volumes from these takeaway infrastructures on the back of record drilling activity, the company is likely to experience continued strength in revenues. In particular, completion of the Atlantic Sunrise project — the biggest expansion project in the history of Transco — and the approval of the Gulf Connector delivery expansion project — enabling Transco to route additional gas volumes to two LNG export complexes — are expected to provide substantial incremental fee-based revenue and drive EBITDA growth.

On the other hand, the Northeast G&P unit is set to benefit from higher gathering volumes and fees triggered by rising natural gas production from Marcellus and Utica shales.

Other Stocks to Consider

Williams is not the only energy firm looking up this earnings season. Here are some firms from the 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:

Encana Corporation (NYSE:ECA) has an Earnings ESP of +5.56% and is Zacks #3 Ranked. The company is anticipated to release earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Independence Contract Drilling, Inc. (NYSE:ICD) has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 1.

TC Energy Corporation (TSX:TRP) has an Earnings ESP of +0.98% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 1.

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