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Why Is Oneok (OKE) Up 13.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Oneok Inc. (OKE). Shares have added about 13.3% in that time frame, outperforming the S&P 500.

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

ONEOK Q3 Earnings Beat Estimates, Revenues Miss

ONEOK Inc. recorded third-quarter 2022 operating earnings per share (EPS) of 96 cents, which surpassed the Zacks Consensus Estimate of 93 cents by 3.2%. The bottom line improved by 9.1% from the year-ago quarter’s tally of 88 cents.

The year-over-year improvement was due to increased natural gas and NGL volumes in the Rocky Mountain region, higher realized commodity prices, average fee rates in the natural gas gathering and processing segment, higher average fee rates in the natural gas liquids segment and increased storage rates in the natural gas pipelines segment.

Total Revenues

Operating revenues of $5,913.5 million missed the Zacks Consensus Estimate of $6,519 million by 9.3%. However, the top line improved by 30.4% from $4,536.2 million in the prior-year quarter.

Highlights of the Release

In the third quarter, OKE’s adjusted EBITDA was $902.4 million, up 4.3% year over year.

ONEOK’s operating income came in at $699.2 million in the third quarter, up 4.7% from the prior-year quarter’s reading.

ONEOK incurred interest expenses worth $166.9 million, down 9.3% from the prior-year quarter’s level.

Financial Highlights

As of Sep 30, 2022, ONEOK had cash and cash equivalents worth $22.2 million compared with $146.4 million as of Dec 31, 2021.

The long-term debt (excluding current maturities) was $11,950.7 million as of Sep 30, 2022, down from $12,747.6 million as of Dec 31, 2021.

ONEOK’s cash provided by operating activities for the first nine months of 2022 was $1,865.5 million compared with $1,491.2 million in the year-ago period.

Capital expenditures (including maintenance) amounted to $886.1 million in the first nine months of 2022, up from $490.3 million in the corresponding period of the previous year.

Guidance

ONEOK affirmed the 2022 net income and adjusted EBITDA in the range of $1,550-$1,830 million and the $3,470-$3,770 million range, respectively. OKE reiterated 2022 EPS in the range of $3.45-$4.07. The Zacks Consensus Estimate for 2022 earnings of $3.72 per share is lower than $3.76, the midpoint of the guided range.

ONEOK’s Natural Gas Gathering and Processing segment expects 2022 gathered volume in the range of 2,090-2,370 million cubic feet per day (MMcf/d), up from the year-ago level of 2,030 MMcf/d. This segment expects processed volumes in the range of 1,980-2,240 MMcf/d, up from the 2021 levels of 1,903 MMcf/d.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Oneok has a nice Growth Score of B, however its Momentum Score is doing a bit 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 A. 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 this revision looks promising. Notably, Oneok has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Oneok belongs to the Zacks Oil and Gas - Production Pipeline - MLB industry. Another stock from the same industry, Magellan Midstream Partners (MMP), has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Magellan Midstream reported revenues of $876.1 million in the last reported quarter, representing a year-over-year change of +37.1%. EPS of $1.29 for the same period compares with $1.09 a year ago.

For the current quarter, Magellan Midstream is expected to post earnings of $1.30 per share, indicating a change of +4.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.5% over the last 30 days.

Magellan Midstream has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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