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ONEOK Inc. (OKE - Analyst Report) reported second-quarter 2014 adjusted earnings of 33 cents per share, missing the Zacks Consensus Estimate of 38 cents by 13.2%. Quarterly earnings decreased 8.3% year over year, primarily due to higher total operating expenses and an increase in shares outstanding.

 

Including a charge from discontinued operations, quarterly net income came in at 29 cents per share. The company had posted break-even results in the prior-year quarter.

Shares of ONEOK Inc. edged down 1.4% on Aug 5 following its unfavorable second-quarter performance.

Total Revenue

In the quarter under review, ONEOK Inc.’s total revenues of $3,066.9 million fell short of the Zacks Consensus Estimate of $3,404 million by 9.9%. On a year-over-year basis, reported revenues increased 10.8% from $2,769 million a year ago, mainly on the back of a rise in commodity sales and a higher contribution from service operations.

Operating Highlights

In the reported quarter, ONEOK Inc.’s total operating expenses were $244.1 million compared with $184.6 million a year ago. A 32.2% rise was primarily driven by higher operations and maintenance as well as depreciation and amortization expenses.

The company’s operating income was $251.3 million, up 10% year over year mainly due to an increase in natural gas volumes gathered, processed and sold, NGL sold, and higher revenues from the natural gas pipeline transportation business.

In the quarter, the company incurred $88.8 million as interest expense, up 34.3% primarily due to an increase in long-term debt.

Financial Condition

As of Jun 30, 2014, ONEOK Inc. had cash and cash equivalents of $0.4 billion, up from $0.15 billion as of Dec 31, 2013.

Long-term debt (excluding current maturities), as of Jun 30, 2014, was $7.2 billion versus $7.8 billion as of Dec 31, 2013.

In the first half of 2014, the company’s cash flow from operating activities was $0.5 billion, lower than $0.8 billion in the year-ago period.

During the first six months of 2014, ONEOK Inc. invested $0.8 billion as capital expenditure, down from $1.1 billion in the prior-year period.

Guidance

ONEOK Inc. reiterated its 2014 guidance based on a stable performance expected in the second half of 2014 from its subsidiary ONEOK Partners L.P. (OKS - Analyst Report) and a projected rise in dividend payment. Net income and operating income are expected to be $285 million and $1,160 million, respectively, for the year.

The company is expected to allocate $560–$640 million for the 2014 dividend payout.

Other Company Releases

AGL Resources Inc. (GAS - Analyst Report) reported second-quarter 2014 earnings per share of 40 cents, missing the Zacks Consensus Estimate by 2.4%.

MDU Resources Group Inc. (MDU - Snapshot Report) reported second-quarter 2014 earnings per share of 29 cents, in line with the Zacks Consensus Estimate.

Zacks Rank

ONEOK Inc. currently has a Zacks Rank #3 (Hold).

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