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On Mar 8, 2013, we upgraded our recommendation on ONEOK Inc. (OKE - Analyst Report) to Neutral from Underperform. In the last reported quarter, the company posted positive earnings surprise of 17.78%. ONEOK Inc. currently has a Zacks Rank #3 (Hold).
Reasons for Upgrade
The revision in recommendation was primarily driven by strong results in both the fourth-quarter and the full year. The improvement in performance was primarily attributable to higher natural gas and natural gas liquids (NGL) volumes, and lower operating costs.
We are impressed with ONEOK Inc.'s steady progress in its Stateline II natural gas processing plant and Bakken NGL pipeline projects. These projects will enable the company to cope with increased natural gas and NGL production in the Bakken Shale region.
ONEOK Inc. repurchased shares worth $150 million in 2012 under its $750 million 3-year share repurchase program. Till date, the company has bought back shares worth $450 million and can repurchase shares, worth $300 million, in 2013. We believe this effort will further increase shareholder returns.
ONEOK Inc. maintains a strong financial position, and is equipped with structured and flexible growth through either an organic or inorganic route. Steady cash flow generation from the company’s operating segments allows it flexibility along with more investment options.
The Zacks Consensus Estimate for first-quarter 2013 currently stands at 59 cents per share, up 13.79% y/y, after considering the above-mentioned strong positives.
Other Stocks to Consider
Besides ONEOK Inc., other stocks in the industry that are currently performing well include The Laclede Group Inc. (LG - Snapshot Report) having a Zacks Rank #1 (Strong Buy), and Atmos Energy Corporation (ATO - Snapshot Report) and Sempra Energy (SRE - Analyst Report) with a Zacks Rank #2 (Buy).
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