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ONEOK (OKE) Rides on Midstream Assets & Fee-Based Earnings
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ONEOK, Inc. (OKE - Free Report) is an energy company engaged in natural gas and natural gas liquids (NGL) businesses. The company’s increased fee-based earnings, midstream assets located in higher productive regions and diverse customer base are likely to boost its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to strict regulations, seasonality of operations and higher costs related to land usage.
Tailwinds of OKE
ONEOK invests in organic growth projects to expand in the existing operating regions and provide a broad range of services to crude oil as well as natural gas producers and end-use markets. Total capital expenditures for the first half of 2024 were $991 million. The company expects capital expenditures to be in the range of $1.75-$1.95 billion in 2024.
The company is also expanding its operations through inorganic initiatives. OKE completed the acquisition of Magellan Midstream Partners, L.P. in September 2023. The company will have access to Magellan's assets and customers, which will allow it to expand operations and develop new revenue sources.
In May 2024, ONEOK agreed to acquire a system of NGL pipelines from Easton Energy for nearly $280 million. This acquisition will provide the quickest pipeline connectivity to and within the critical supply and demand centers for its NGL, refined products and crude oil assets in the Gulf Coast. These strategic acquisitions are expected to produce considerable cost savings and synergies, thus enhancing the company's profitability.
OKE's Headwinds
ONEOK is subject to numerous environmental laws and regulations and changes, or liabilities under, existing or new laws and regulations. The cost of complying with new regulations could increase the cost of operations while failure to meet the same might impact its business.
The company does not own all the land on which its pipelines are situated. It, therefore runs the risk of higher costs related to the necessary land usage. Failure to renew existing land rights and add new rights to lay down its pipelines will impact the operation and profitability of the company.
Price Performance
Shares of OKE have gained 7.8% in the past month compared with the industry’s 1.3% growth.
Delek Logistics delivered an average earnings surprise of 2.5% in the last four quarters. The Zacks Consensus Estimate for 2024 earnings indicates year-over-year growth of 5.6%.
Canadian Solar delivered an average earnings surprise of 58.2% in the last four quarters. The consensus estimate for 2025 earnings indicates year-over-year growth of 33.5%.
MPLX delivered an average earnings surprise of 7.5% in the last four quarters. The Zacks Consensus Estimate for 2024 earnings indicates year-over-year growth of 10.8%.
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ONEOK (OKE) Rides on Midstream Assets & Fee-Based Earnings
ONEOK, Inc. (OKE - Free Report) is an energy company engaged in natural gas and natural gas liquids (NGL) businesses. The company’s increased fee-based earnings, midstream assets located in higher productive regions and diverse customer base are likely to boost its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to strict regulations, seasonality of operations and higher costs related to land usage.
Tailwinds of OKE
ONEOK invests in organic growth projects to expand in the existing operating regions and provide a broad range of services to crude oil as well as natural gas producers and end-use markets. Total capital expenditures for the first half of 2024 were $991 million. The company expects capital expenditures to be in the range of $1.75-$1.95 billion in 2024.
The company is also expanding its operations through inorganic initiatives. OKE completed the acquisition of Magellan Midstream Partners, L.P. in September 2023. The company will have access to Magellan's assets and customers, which will allow it to expand operations and develop new revenue sources.
In May 2024, ONEOK agreed to acquire a system of NGL pipelines from Easton Energy for nearly $280 million. This acquisition will provide the quickest pipeline connectivity to and within the critical supply and demand centers for its NGL, refined products and crude oil assets in the Gulf Coast. These strategic acquisitions are expected to produce considerable cost savings and synergies, thus enhancing the company's profitability.
OKE's Headwinds
ONEOK is subject to numerous environmental laws and regulations and changes, or liabilities under, existing or new laws and regulations. The cost of complying with new regulations could increase the cost of operations while failure to meet the same might impact its business.
The company does not own all the land on which its pipelines are situated. It, therefore runs the risk of higher costs related to the necessary land usage. Failure to renew existing land rights and add new rights to lay down its pipelines will impact the operation and profitability of the company.
Price Performance
Shares of OKE have gained 7.8% in the past month compared with the industry’s 1.3% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Better-ranked stocks in the sector are Delek Logistics Partners, LP (DKL - Free Report) , Canadian Solar Inc. (CSIQ - Free Report) and MPLX LP (MPLX - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of Zacks Rank #1 (Strong Buy) stocks here.
Delek Logistics delivered an average earnings surprise of 2.5% in the last four quarters. The Zacks Consensus Estimate for 2024 earnings indicates year-over-year growth of 5.6%.
Canadian Solar delivered an average earnings surprise of 58.2% in the last four quarters. The consensus estimate for 2025 earnings indicates year-over-year growth of 33.5%.
MPLX delivered an average earnings surprise of 7.5% in the last four quarters. The Zacks Consensus Estimate for 2024 earnings indicates year-over-year growth of 10.8%.