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ONEOK (OKE) Q3 Earnings: Stock Poised to Beat Estimates

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We expect ONEOK Inc. (OKE - Free Report) to beat expectations when it reports third-quarter 2016 results after the closing bell on Nov 1. Last quarter, this stock had reported a negative surprise of 2.38%.

Why a Likely Positive Surprise?

Our proven model shows that ONEOK is likely to beat estimates this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and ONEOK has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.33%. This is because the Most Accurate estimate stands 44 cents, while the Zacks Consensus Estimate is pegged at 43 cents. This is a meaningful indicator of a likely positive earnings surprise.

ONEOK INC Price and EPS Surprise

ONEOK INC Price and EPS Surprise | ONEOK INC Quote

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: ONEOK’s Zacks Rank #3, when combined with its positive ESP, makes us reasonably confident of positive surprise this quarter.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factor to Consider

Rising popularity of natural gas due to its clean-burning and affordable nature resulted in excessive production in the third quarter. This will likely add to ONEOK’s top line in the third quarter as higher natural gas production will warrant higher use of the company’s services. Moreover, ONEOK’s contract restructuring initiatives and cost reduction efforts will continue through the third quarter, boosting its cash flows.

ONEOK anticipates natural gas liquids volume growth to be higher in the second half of 2016 than the first, driven by higher demand. Further, an increase in ethane demand due to a rise in petrochemical facilities and higher exports to Mexico spurred by growing demand in the third quarter will boost third-quarter revenues.

ONEOK has contracted 92% of its transportation capacity and 71% of its storage capacity, thereby increasing visibility on third-quarter revenues.

Other Stocks to Consider

Here are a couple of other operators in the same space worth considering on the basis of our model, which shows that they also have the right combination of elements to post an earnings beat this quarter:

UGI Corporation (UGI - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #3. The company is slated to report fourth-quarter fiscal 2016 results on Nov 9.

ONE Gas, Inc. (OGS - Free Report) is scheduled to report third-quarter 2016 results on Oct 31. The company has an Earnings ESP of +31.58% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apart from these two, you may also consider the following utility stock, which is poised for an earnings beat this quarter.

Avista Corp. (AVA - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #2. It is slated to report earnings on Nov 1.

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