On Tuesday, Truist Securities adjusted the price target for shares of ONEOK Inc (NYSE: NYSE:OKE), lifting it to $107 from the previous $99, while keeping a Hold rating on the stock. According to InvestingPro data, ONEOK's stock has surged 65% year-to-date, with analyst targets ranging from $89 to $147.
The modification follows ONEOK's announcement of its agreement to acquire all outstanding EnLink units for $4.3 billion. This strategic move is anticipated to yield slight earnings accretion in 2025, with more significant accretion expected in 2026 as the integrated assets within the Permian Basin platform are further developed.
With a market capitalization of $64.5 billion and strong financial health metrics according to InvestingPro's analysis, ONEOK appears well-positioned for this expansion.
The acquisition is seen as a step that aligns with ONEOK's previous statements, where the company indicated an interest in purchasing the shares, although the exact timing was not confirmed. Truist Securities acknowledges that the series of deals presents strategic opportunities for ONEOK, including the potential for advanced AI projects.
The firm forecasts that as the newly acquired complementary assets become more established, they will continue to enhance ONEOK's integrated Permian Basin platform. This integration is projected to contribute positively to the company's performance in the coming years.
Despite the potential benefits from the acquisition and future projects, the current valuation of ONEOK's shares has led Truist Securities to maintain their Hold rating. The firm's stance reflects a cautious optimism, recognizing the strategic nature of the acquisition while also considering the time required to realize the full benefits of the transaction.
Based on InvestingPro's comprehensive Fair Value analysis, ONEOK appears slightly overvalued at current levels, with a robust EBITDA of $5.6 billion and a healthy dividend yield of 3.6%.
In other recent news, ONEOK, Inc. has revised its full-year 2024 financial guidance upward for the second time, attributing the positive changes to robust fee-based earnings and the benefits of recent acquisitions.
The company's third-quarter net income was reported at $693 million and an adjusted EBITDA of $1.55 billion, primarily driven by operations in the Rocky Mountain region and natural gas pipeline services. CEO Pierce Norton announced that the adjusted EBITDA for 2024 is projected to more than double compared to five years prior, indicating growth following the Magellan acquisition.
ONEOK expects significant volume growth in the Permian Basin and the completion of key pipeline expansions by the end of 2024 and into 2025. The company has also resumed operations following disruptions caused by wildfires in North Dakota. Moreover, the company has completed the acquisition of EnLink Midstream (NYSE:ENLC) and expects to finalize the Medallion acquisition soon.
These recent developments highlight ONEOK's optimistic outlook, focusing on synergy opportunities from recent acquisitions and organic growth. The company's infrastructure is strategically positioned to support LNG exports in Louisiana, with potential for further consolidation in the Mid-Continent region.
As the year progresses, ONEOK prepares for a busy period with the finalization of the Medallion acquisition and the progression of Phase II of the EnLink transaction.
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