Earlier this week, energy infrastructure company The Williams Companies, Inc. (WMB) delivered better-than-expected Q3 2021 results. Let us take a look at the company’s performance, and the changes in its key risk factors that investors should know.
Driven by higher product sales and service revenue, WMB’s quarterly revenues increased 28% year-over-year to $2.48 billion, outperforming estimates by $387.3 million.
Alan Armstrong, President and CEO of WMB, remarked, “Our natural gas-focused strategy and unmatched infrastructure continue to be called upon by customers to meet continued growing demand for clean energy.”
He added, “The second phase of our Leidy South expansion will be in full service ahead of schedule and in time for this winter’s heating season. In addition, we are executing on another 1.5 Bcf/d in high-return expansions along existing Transco and Gulfstream corridors, underscoring the long-term demand commitments of our customers.” (See Insiders’ Hot Stocks on TipRanks)
The company’s earnings per share (EPS) rose 26% over the previous year to $0.34, and exceeded estimates by $0.06.
Looking ahead for FY 2021, WMB sees adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in the range of $5.5 billion to $5.55 billion, indicating an increase of $325 million at the midpoint from the guidance issued in February.
On November 2, Evercore ISI analyst Todd Firestone reiterated a Buy rating on the stock alongside a price target of $32 (12.72% upside potential). Firestone attributed the robust Q3 results by WMB to volume increases and Natural Gas Liquid (NGL) price strength, and expects these factors to contribute to a better full-year outlook.
Consensus on the Street is a Strong Buy based on 7 Buys and 2 Holds. At the time of writing, the average Williams price target was $31.11, which implies a potential upside of 9.58% for the stock.
Now, let us look at what’s changed in the company’s key risk factors profile.
According to the new Tipranks Risk Factors tool, WMB’s top risk categories are Finance & Corporate, and Production, each accounting for 30% of the total 37 risks identified. In its recent Q3 report, the company added one key risk factor under the Finance & Corporate risk category.
The new risk factor pertains to hedging contracts. WMB has entered contracts to hedge risks associated with its operations and assets, and to manage its exposure to commodity prices and market gyrations.
However, any hedging arrangement cannot fully address all the risks present in a contract; thus unhedged risks will continue to remain.
Furthermore, since the accounting treatment of the hedged position (mark-to-market accounting) is different from the underlying instrument, it may result in volatility.
WMB’s Production risk is at 30%, against a sector average of 24%. Meanwhile, shares were up 41.2% this year.
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