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Why Is Oneok (OKE) Up 21.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Oneok Inc. (OKE - Free Report) . Shares have added about 21.6% in that time frame, outperforming 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's Earnings Beat Estimates in Q1, Revenues Miss

ONEOK posted first-quarter 2020 operating earnings of 83 cents per share, which beat the Zacks Consensus Estimate of 80 cents by 3.75%. Also, the bottom line increased 2.46% on a year-over-year basis.

Total Revenues

Total revenues were $2.14 billion, which missed the Zacks Consensus Estimate of $2.51 billion by 15%. The figure declined 23.1% from $2.78 billion in the prior-year quarter.

Highlights of the Release

The company spent $1.27 billion on cost of sales and fuel, down 34.7% from the year-ago quarter’s tally.

In the first quarter, ONEOK’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $700.8 million, up 10% year over year.

The company incurred interest expenses of $140.6 million, up 21.8% from $115.4 million in the prior-year quarter.

The company incurred operating loss of $83.4 million in the first quarter, against operating income of $468.7 million in the prior-year quarter.

Financial Highlights

As of Mar 31, ONEOK had cash and cash equivalents of $531.6 million compared with $21 million as of Dec 31, 2019.

Long-term debt (excluding current maturities) was $14,146.6 million as of Mar 31, 2020, up from $12,479.7 million as of Dec 31, 2019.

The company’s cash flow from operating activities at the end of the first quarter was $422.7 million, up from $353.6 million at the end of first-quarter 2019.

Capital expenditures (less allowance for equity funds used during construction) amounted to $949.6 million at the end of the first quarter, up from $889.7 million in the year-ago quarter.

Guidance

For 2020, ONEOK projects net income in the range of $500-$900 million, which includes the $641.8 million impact of first-quarter impairment charges. Also, the company expects 2020 adjusted EBITDA in the range of $2,600-$3,000 million.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.16% due to these changes.

VGM Scores

At this time, Oneok has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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. It's no surprise Oneok has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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