On Wednesday, CFRA maintained its Buy rating on ONEOK Inc (NYSE:OKE) and increased the stock's price target from $83.00 to $90.00. The new target reflects an 11.2x multiple of the company's projected enterprise value to 2025 EBITDA, which aligns with ONEOK's historical forward average. The firm also adjusted its earnings per share (EPS) estimates for the upcoming years, raising the 2024 projection by $0.23 to $5.11 and the 2025 forecast by $0.26 to $5.77.
The company's second-quarter earnings per share of $1.33 exceeded the consensus estimate by $0.19, outperforming last year's figure of $1.04. ONEOK's financial health appears robust, with net debt to EBITDA at 3.36x at the end of the quarter, a favorable comparison to the midstream industry's typical ratio near 4x.
ONEOK's performance in different regions was highlighted, with natural gas liquids volumes in the Rocky Mountain area increasing by 17% year-over-year, and volumes in the Mid-Continent region growing by 16%.
However, the Permian/Gulf Coast region saw a 3% decline in NGL volumes, potentially due to low ethane prices that may have discouraged ethane recovery. Nevertheless, recent data from the Energy Information Administration (EIA) indicated a rise in ethane prices in July, leading to resumed ethane recovery in the area.
The report concluded by noting the diversified contributions to ONEOK's positive quarterly results. The company's shares currently offer a dividend yield of 5.0%.
In other recent news, ONEOK Inc. has reported a strong financial performance for the second quarter of 2024, with a 28% year-over-year increase in net income, reaching $780 million.
This growth is attributed to increased volumes in natural gas liquids and natural gas processing, particularly in the Rocky Mountain region, improved transportation service rates, and positive contributions from refined products and crude segments. The company's balance sheet remains robust, with no outstanding borrowings and a net debt-to-EBITDA ratio of 3.36x.
ONEOK also confirmed that it is on track to meet or exceed its full-year 2024 financial guidance. The company is actively pursuing growth opportunities, including the El Paso expansion in the refined products segment. Expansion projects in Texas and Oklahoma are on schedule, with the Texas project expected to be completed next month.
ONEOK has emphasized its commitment to returning value to investors through a balanced approach to capital allocation. The company is confident in its ability to achieve outlined cost and commercial synergies of $175 million from recent acquisitions.
Long-term contracts in the Bakken region and superior service are expected to mitigate any impact from a competitor's NGL pipeline conversion. These are among the recent developments in ONEOK's business operations.
InvestingPro Insights
Following CFRA's optimistic outlook on ONEOK Inc (NYSE:OKE), InvestingPro data provides a deeper financial perspective on the company's recent performance. With a robust market capitalization of $48.78 billion, ONEOK's P/E ratio stands at 17.81, reflecting the market's valuation of its earnings. Notably, the company's revenue for the last twelve months as of Q2 2024 is reported at $19.1 billion, with a slight decline in revenue growth of -0.52%. Despite this, ONEOK experienced a substantial quarterly revenue growth of 31.14% in Q2 2024, indicating a potential turnaround or seasonal strength.
InvestingPro Tips highlight the company's attractive dividend yield of 4.81%, which is particularly appealing to income-focused investors. Moreover, the company's price is at 95.5% of its 52-week high, suggesting a strong market sentiment. For those considering a deeper dive into ONEOK's financials, InvestingPro offers an array of additional tips—currently listing 15 more tips to help investors make informed decisions.
Investors should also note the company's solid gross profit margin of 37.76% and an operating income margin of 18.38% for the same period. These margins reflect ONEOK's ability to maintain profitability amidst market fluctuations. With the next earnings date on October 29, 2024, investors will be keenly watching for the company's performance updates to align their strategies accordingly.
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