ONEOK Inc. OKE is well poised to gain from the acquisition of ONEOK Partners, higher fee-based earnings and return from its midstream assets located in higher productive regions of the United States.
Retaining this Zacks Rank #3 (Hold) stock in your portfolio now is a good idea, given the following positive factors.
Positive Growth Projections: The Zacks Consensus Estimate for earnings is $1.63 on revenues of $10.99 billion for 2017. The bottom line reflects a slight decline of 2.16% year over year but the top-line projection is 23.24% higher. For 2018, the Zacks Consensus Estimate for earnings is pegged at $1.98 on revenues of $12.10 billion. While earnings represent a 21.07% rally, revenues reflect a 10.07% rise.
ONEOK has long-term expected earnings per share growth rate of 7.53%.
Estimates Move Up: The Zacks Consensus Estimate has witnessed upward revisions in the last 30 days. Estimates for 2018 have jumped 12.5%.
Strong Return: ONEOK’s shares have gained 9.3% in the last three months compared with the industry's rally of 1.8%.
Growth Drivers
In the second quarter, ONEOK completed the acquisition of ONEOK Partners. This is going to be accretive to distributable cash flow from 2017 through 2021.ONEOK Partners’ financial strength, diversified operations, excellent market connectivity and systematic investments in organic projects and strategic acquisitions provide ONEOK a distinct competitive advantage.
Thanks to ONEOK’s ongoing investment to strengthen its infrastructure and presence in the liquid rich region, the natural gas processing plants capacity of the company will touch 1.1 billion cubic feet per day by 2019. The company will be able to cater to the improved well productivity in the STACK and SCOOP plays and Williston and Permian basins.
In addition, the long-term fee-based contracts in its Natural Gas Pipeline segment are also going to contribute to the total revenues of the company.
Stocks to Consider
Some better-ranked stocks in the industry are Just Energy Group Inc. JE, Northwest Natural Gas Company NWN and Clean Energy Fuels Corp. CLNE. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Just Energy reported positive earnings surprises in two of last four quarters with an average surprise of 202.5%. Its fiscal 2018 Zacks Consensus Estimate moved up 65.6% to 53 cents in the last 60 days.
Northwest Natural Gas Company reported positive earnings surprises in two of last four quarters with an average surprise of 15.5%. Its 2017 Zacks Consensus Estimate moved up 0.9% to $2.19 in the last 60 days.
Clean Energy Fuels reported positive earnings surprises in last four quarters with an average surprise of 131.8%. Its 2017 Zacks Consensus Estimate moved up 66.7% to 5 cents in the last 60 days.
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