Back to top

Analyst Blog

Zacks Equity Research

ONEOK Inc. Stays in Neutral Lane

OKE OGE

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We reiterate our Neutral recommendation on ONEOK Inc. (OKE - Analyst Report). In second-quarter 2012, the company’s earnings per share and revenue fell short of the Zacks Consensus Estimates, primarily due to continued pressure from the Energy Services segment.

We know that ONEOK’s operations are subject to several federal, state, and local regulations, as well as extensive environmental rules. The utility regulatory authorities in Oklahoma, Kansas and Texas regulate many aspects of the company’s utility operations including customer service and the rates charged to customers. ONEOK’s profitability principally depends on its ability to realize costs associated with providing energy and other commodities to customers by obtaining the required regulatory approvals.

In addition, ONEOK's business and products, particularly propane is weather sensitive. This seasonality along with deviations in weather conditions may cause variation in the company’s earnings and short-term cash requirements.
 
Apart from these negative factors, ONEOK maintains a strong financial position, equipped with structured and flexible fund growth, either organically or inorganically. Strong cash flow generation from its operating segments provides the company flexibility along with pursuing more investment options.

We know that transportation of crude oil or natural gas to the marketplace through rail or truck, specifically in the Williston Basin, is challenging due to harsh and volatile weather. We believe installation of Bakken Crude Express Pipeline will provide ONEOK with a reliable and cost-effective means of transportation compared to other alternatives. It is expected to act as the company’s future growth platform with strong economic feasibility to provide superior services to producers and refiners.  

In addition, we believe that ONEOK’s future financial performance should get a boost from deployment of $1 billion in additional projects and strong contribution from the ONEOK Partners segment.

However, we are concerned about volatile credit markets and unpredictable commodity prices, which might negatively impact the company’s future financial and operational performance.

ONEOK Inc. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company, operating as a natural gas distributor, primarily in the United States. The company competes with OGE Energy Corp. (OGE - Analyst Report).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%