Williams Companies: An Early Earnings Look

Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors, and Williams Companies (NYSE: WMB  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

As the only pipeline-focused company in the Dow Jones Utilities (DJINDICES: ^DJU  ) , Williams Companies has benefited strongly from the rise in demand for oil and natural gas transportation. With its spinoff of exploration and production company WPX Energy (NYSE: WPX  ) in late 2011, Williams Companies is solely a midstream-oriented business. Let's take an early look at what's been happening with Williams Companies over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Williams Companies

Analyst EPS Estimate

$0.26

Change From Year-Ago EPS

(28%)

Revenue Estimate

$2.03 billion

Change From Year-Ago Revenue

(3.6%)

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Williams Companies deliver the goods this quarter?
Analysts haven't been too confident about Williams Companies over the past few months, with earnings-per-share estimates coming down $0.04 for the just-ended quarter and $0.12 for full-year 2013, as fears of production declines that could adversely affect pipeline throughput hit the company. Yet investors haven't let that pessimism hit the share price, which is up nearly 15% since mid-November.

Williams Companies acts as general partner for master limited partnership Williams Partners (NYSE: WPZ  ) and owns about a 70% interest in the MLP, which has a substantial presence in the Marcellus Shale area in the eastern U.S. as well as a vital pipeline connecting New York and Texas. In particular, Williams Companies has capitalized on the trend among utility companies to use more natural gas in their power-generation activities, as the Williams Partners MLP gets more than half of its business from delivering fuel to gas-fired power plants.

Unfortunately, Williams Companies has retained some of its exposure to energy prices, and that has hurt results over the past year. That stands in contrast to Enterprise Products Partners (NYSE: EPD  ) and many of its peers that emphasize fee-based arrangements that aren't fuel-price-sensitive. Looking forward, though, Williams Companies expects to take more of its projects on a fee basis, reducing volatility from moving energy prices.

In its earnings report, Williams Companies will probably see continued pressure from low natural gas prices. Hopefully, though, the company will report on the status of its major projects, including its application with the Federal Energy Regulatory Commission to add a new delivery point to its New York City distribution system. Williams Companies needs to make the most of the pipeline boom as long as it lasts, and minimizing delays will be a key part of its success.

There's plenty of room for pipeline expansion, but low nat-gas prices are a big threat to the industry. To find out more about the prospects for pipeline companies, read our premium report on Enterprise Products Partners. Inside, our top energy analyst looks at the massive opportunities for Enterprise, given its superior integrated asset base. Don't wait; click here now to get your report instantly.

Click here to add Williams Companies to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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