Oneok (OKE) Down 70.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Oneok Inc. (OKE). Shares have lost about 70.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oneok due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ONEOK (NYSE:OKE)'s Earnings and Revenues Beat Estimates in Q4

ONEOK reported fourth-quarter 2019 operating earnings of 77 cents per share, which beat the Zacks Consensus Estimate of 75 cents by 2.7%. The figure also improved 10% on a year-over-year basis.

In 2019, the company delivered earnings of $3.07 per share compared with $2.78 reported in 2018. The upside can be attributed to growth in natural gas liquids (NGL) and natural gas volume, higher average fee rates in the natural gas liquids and natural gas gathering and processing segments, and increased transportation services in the natural gas pipelines segment.

Total Revenues

Total revenues were $2.66 billion, which beat the Zacks Consensus Estimate of $2.42 billion by 9.7%. The figure declined 15% from $3.14 billion in the prior-year quarter.

In 2019, the company reported revenues of $10.16 billion, down from $12.59 billion in 2018.

Highlights of the Release

The company spent $1.79 billion on cost of sales and fuel, down 22.7% from the year-ago quarter’s tally.

In the fourth quarter, ONEOK’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $660.5 million, up 5.6% year over year.

The company incurred interest expenses of $129.3 million, up 9.1% from $118.5 million in the prior-year quarter. Operating income was $487.3 million in the fourth quarter, up from $471.8 million in the prior-year quarter.

Elk Creek Pipeline and the Demicks Lake I and II plants projects were completed in 2019.

Financial Highlights

As of Dec 31, 2019, ONEOK had cash and cash equivalents of $21 million compared with $12 million as of Dec 31, 2018.

Long-term debt (excluding current maturities) was $12,479.7 million as of Dec 31, 2019, up from $8,873.3 million as of Dec 31, 2018.

The company’s cash flow from operating activities at the end of Dec 31, 2019 was $1,946.8 million, down from $2,186.7 million at the end of Dec 31, 2018.

Capital expenditures (less allowance for equity funds used during construction) amounted to $3,848.3 million, up from $2,141.5 million in the year-ago period.

Guidance

For 2020, ONEOK projects net income in the range of $1,355-$1,605 million. Also, the company expects 2020 adjusted EBITDA in the range of $2,250-$2,730 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Oneok has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oneok has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.