On Wednesday, JPMorgan updated its outlook on ONEOK Inc (NYSE: NYSE:OKE), a prominent player in the energy sector, by increasing its stock price target from $85.00 to $88.00. The firm has kept its Overweight rating on the stock, indicating a positive expectation of the company's performance.
The adjustment comes after a review of the company's financial prospects, with an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) forecast of approximately $1.44 billion for the first quarter of 2024 and $6.24 billion for the full year.
The revised estimates take into account potential impacts from winter weather conditions, which have been factored into the natural gas gathering and processing (G&P) results. The G&P segment is projected to yield $288 million, showing a slight year-over-year increase, although this estimate may be on the conservative side.
During the fourth-quarter earnings call, ONEOK's management mentioned disruptions due to freeze-offs in mid-January, but confirmed that operations had returned to normal by the end of the month. For 2024, the company has forecasted an average of 1.6 billion cubic feet per day (bcfd) in Rockies natural gas volumes, inclusive of the effects from winter storms.
In terms of the natural gas liquids (NGL) segment, a result of $570 million is anticipated, influenced by lower throughput but partially compensated by higher rate barrels on the Overland Pass. The market is awaiting further details on the potential synergies with Magellan Midstream Partners (NYSE:MMP), which could present additional upside.
The natural gas pipelines segment is expected to benefit from a full quarter of seasonal take-or-pay contracts, which typically run from November through March, leading to a sequential increase to $166 million.
Finally, for the remaining business segments that include refined products and crude oil, a contribution of $423 million is projected, taking into account the usual seasonal patterns and the fact that butane blending is largely hedged.
InvestingPro Insights
ONEOK Inc (NYSE: OKE) has recently been in the spotlight following JPMorgan's price target update. For investors looking deeper into the company's financial health, real-time data from InvestingPro offers a comprehensive view. With a market capitalization of $46.74 billion and a P/E ratio that stands at 14.57, ONEOK appears to have a stable valuation in the current market.
The company's revenue for the last twelve months as of Q4 2023 was reported at $17.68 billion, despite a decline of 21.04% in the same period. However, the quarterly revenue growth shows a positive trend with an increase of 4.03% in Q4 2023.
InvestingPro Tips highlight the company's robust dividend yield of 4.95%, a key factor for income-focused investors, along with a healthy dividend growth of 5.88%. Additionally, the PEG ratio, which stands at 0.41, suggests that the stock may be undervalued considering its earnings growth potential.
For those interested in exploring further, InvestingPro has numerous additional tips that can provide deeper insights into ONEOK's performance and potential investment opportunities. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full spectrum of analysis and tips available on the platform.
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