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Oneok (OKE) Down 8.2% Since Last Earnings Report: Can It Rebound?

·3-min read

A month has gone by since the last earnings report for Oneok Inc. (OKE). Shares have lost about 8.2% 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 Q3 Earnings Beat Estimates, Revenues Rise Y/Y

ONEOK posted third-quarter 2021 operating earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 83 cents by 6%. Also, the bottom line improved 25.7% year over year.

Improving economic conditions led to an increase in volumes of natural gas and natural gas liquids, thus benefiting the quarterly results.

Revenue Results

Total revenues of $4,536.2 million missed the Zacks Consensus Estimate of $5,324 million by 14.8%. However, the top line improved 108.6% from $2,174.3 million in the prior-year quarter.

Highlights of the Release

The company spent $3,449.1 million on cost of sales and fuel, up 172.5% from the year-ago quarter’s level.

In the third quarter, ONEOK’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $865.2 million, up 15.8% year over year.

The company incurred interest expenses worth $184 million, up 4.4% from the prior-year quarter’s level.

Its operating income came in at $667.9 million in the third quarter, up 21.3% from the prior-year quarter’s reading.

The company completed the 200-million cubic feet per day (MMcf/d) Bear Creek natural gas processing plant expansion and its related infrastructure in the Williston Basin. In September 2021, it announced plans to reduce greenhouse gas emissions (combined Scope 1 and Scope 2 emissions) by 30% within 2030 from the 2019 levels.

Financial Highlights

As of Sep 30, 2021, ONEOK had cash and cash equivalents worth $224.3 million compared with $524.5 million as of Dec 31, 2020.

Long-term debt (excluding current maturities) was $13,640.5 million as of Sep 30, 2021, down from $14,228.4 million as of Dec 31, 2020.

The company’s cash provided by operating activities in the first nine months of 2021 was $1,491.2 million, up from $1,103.1 million in the comparable period of last year.

Capital expenditures (including maintenance) amounted to $166.2 million in the third quarter of 2021, down from $380 million in the corresponding quarter of last year.

Guidance

ONEOK increased its 2021 net income and adjusted EBITDA to the range of $1,430-$1,550 million and $3,325-$3,425 million, respectively, up from the earlier guided range of $1,200-$1,500 million and $3,050-$3,350 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Oneok has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

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


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