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Oneok (OKE) Up 2.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Oneok Inc. (OKE - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oneok due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ONEOK Posts In-Line Q3 Earnings, Misses on Revenues

ONEOK reported third-quarter 2019 operating earnings of 74 cents per share, in line with the Zacks Consensus Estimate. The bottom line dropped 1.3% on a year-over-year basis.

Notably, higher natural gas liquids (NGL) and natural gas volume, increase in average fee rates along with ramp-up in transportation services in the natural gas pipelines segment drove results. However, results were impacted by lower Mid-Continent NGL volumes as well as higher operating costs and depreciation expenses caused by operation expansion.

Total Revenues

Total revenues amounted to $2.26 billion, which missed the Zacks Consensus Estimate of $2.36 billion by 4.22%. The top line also declined 33.3% from $3.39 billion recorded in the prior-year quarter due to lower Commodity sales.

Highlights of the Release

ONEOK spent $1.41 billion on cost of sales and fuel, down 44.8% from the year-ago quarter’s tally.

The company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $649.8 million, down 0.1% year over year.

The company incurred interest expenses of $129.6 million, up from $122 million in the prior-year quarter. Operating income was $482.2 million, down 2.7% from $495.5 million recorded in the year-ago quarter.

On Oct, 2019, the company completed the 200-million cubic feet per day (MMcf/d) Demicks Lake I Natural Gas Processing Plant in the Williston Basin.

Financial Highlights

As of Sep 30, 2019, ONEOK had cash and cash equivalents of $673.3 million compared with $12 million as of Dec 31, 2018.

Long-term debt (excluding current maturities) amounted to $12,479.5 million as of Sep 30, up from $8,873.3 million as of Dec 31, 2018.

The company’s cash flow from operating activities in the first nine months of 2019 was $1,326.8 million, down from $1,516.5 million in the year-ago period.
Capital expenditures (less allowance for equity funds used during construction) amounted to $2,739.3 million in the first nine months of 2019, up from $1,309.7 million in the year-ago period.

Guidance

The company now expects 2019 net income in the range of $1,220-$1,330 million. The previous guidance was $1,140-$1,400 million.

ONEOK's adjusted EBITDA is expected in the range of $2,560-$2,640 million. The previous guidance was $2,500-$2,700 million.

For 2019, the company expects growth capital expenditures in the range of $3,515-$3,695 million and maintenance capital expenditures in the range of $185-$205 million.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Oneok has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oneok has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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