ONEOK (OKE) Strong on Growth Efforts & Fee-Based Earnings
ONEOK, Inc. OKE is well-poised to benefit from ONEOK Partners buyout, increased fee-based earnings and midstream assets located in higher productive regions.
The Zacks Consensus Estimate for the company’s 2020 earnings is pegged at $1.23 per share and for revenues stands at $9.07 billion.
What’s Aiding the Stock?
ONEOK is well-placed to gain from long-term fee-based commitments in its Natural Gas Gathering and Processing, and Natural Gas Liquids segments. The company anticipates 90% of its current-year earnings to be fee-based.
It continues to invest in organic growth projects for expansion in the existing operating regions and providing a broad range of services to crude oil and natural gas producers as well as the end-use markets. Amid the unprecedented economic crisis due to the pandemic, the company took initiatives to preserve liquidity.
Moreover, ONEOK Partners is the primary growth vehicle of ONEOK and the completion of this buyout is likely to be accretive to its distributable cash flow from 2017 through 2021. Further, the company’s strong cash flow generation capacity is helping it strengthen its balance sheet and add shareholder value.
Woes
However, stringent government regulations and intensifying competition in the pipeline business are potential growth deterrents. Also, the company’s consistently rising long-term debt remains a concern.
Zacks Rank & Price Performance
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past six months, shares of the company have gained 24.8% against the industry’s 2.4% decline.
Stocks to Consider
A few better-ranked utilities are Essential Utilities Inc. WTRG, Southwest Gas Corporation SWX and Otter Tail Corporation OTTR, all carrying a Zacks Rank #2 (Buy) at present.
Essential Utilities has a long-term (three to five years) earnings growth rate of 6.01%. Its average earnings surprise in the last four quarters is 9.67%.
Southwest Gas Corporation has a long-term earnings growth rate of 5%. It pulled off an earnings surprise of 6.53%, on average, in the previous four quarters.
Otter Tail Corporation delivered a trailing four-quarter earnings surprise of 3.92%, on average. The Zacks Consensus Estimate for 2020 earnings has been revised 4.7% upward in the past 60 days.
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