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ONEOK's (OKE) Expansion Efforts, Fee-Based Earnings Bode Well

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ONEOK, Inc. (OKE - Free Report) is well-poised to gain from improved fee-based earnings and midstream assets located in the higher productive regions.

The Zacks Consensus Estimate for the company’s 2021 earnings is pegged at $3.29 per share, suggesting growth of 131.69% from the year-ago reported figure. The consensus mark for revenues stands at $15.45 billion, indicating an increase of 80.88% from the prior-year reported number. The long-term (three to five years) earnings growth rate of ONEOK is 6%.

What’s Aiding the Stock?

ONEOK is well-placed to benefit from long-term fee-based commitments to its Natural Gas Gathering and Processing, and Natural Gas Liquids segments. The company reported more than 90% of its 2020 earnings as fee-based.

It continues to invest in organic growth projects for expansion in the existing operating regions and also provides a broad range of services to crude oil and natural gas producers as well as the end-use markets.

As no single customer contributes more than 10% to ONEOK’s total revenues, this gives stability to its top line. In fact, the loss of one customer is not going to affect the company’s overall performance.

Headwinds

Stringent government regulations and intense competition in the company’s pipeline business are potential growth deterrents. Also, it does not own all the land on which its pipelines are located, which maximizes the risk of incurring elevated expenses to maintain necessary land use.

Zacks Rank & Price Performance

The stock currently carries a Zacks Rank #3 (Hold). In the past year, shares of the company have surged 99.2% compared with the industry’s 20.7% rise.

One Year Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

A few better-ranked utilities are Otter Tail Corporation (OTTR - Free Report) , American States Water Company (AWR - Free Report) and California Water Service Group (CWT - Free Report) . While Otter Tail flaunts a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Otter Tail’s long-term (three to five years) earnings growth rate is pegged at 4.7%. The company delivered a trailing four-quarter earnings surprise of 31.79%, on average.

The Zacks Consensus Estimate for American States Water’s 2021 earnings has been revised 0.4% upward in the past 60 days. The company delivered a trailing four-quarter earnings surprise of 4.35%, on average.

The Zacks Consensus Estimate for California Water’s 2021 earnings has been revised 2.9% upward in the past 60 days. The company delivered a trailing four-quarter earnings surprise of 15.36%, on average.