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ONEOK Partners, L.P. (OKS)

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Second-quarter results for ONEOK Partners LP (OKS) surpassed Zacks Consensus Estimates and beat year-over-year comparisons. OKS' distinct competitive advantages include its scale and financial strength, its broad array of services, supply diversity, excellent market connectivity and low operating costs.

Despite completing a 2-for-1 stock split, we see the partnership as having good potential to maintain a solid balance sheet and investment-grade ratings, while also growing its earnings. Plus, the partnership's growing quarterly distributions (current 5.5% annual yield), driven by the growth of its existing businesses and strategic acquisitions, make it an attractive investment.

We upgrade our recommendation on ONEOK Partners to Outperform. Units of ONEOK Partners are presently trading at 18.1x trailing 12-month EPU, compared to the 31.4x average for the peer group. The trailing 12-month EV/EBITDA multiple is below the industry average. Our target price of $51.00 is based on a P/E multiple of 20.3.

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