ONEOK (OKE) Expansion Effort Gains, Fee Based Revenue
ONEOK, Inc. OKE is well positioned to benefit from its strategic acquisition of ONEOK Partners, increased fee-based revenues, and intermediate assets located in the most productive regions.
Zacks’ consensus estimate for the company’s earnings in 2021 is set at $ 3.31 per share, which suggests a growth of 133.10% from the figure released a year ago. The consensus mark in revenue stands at $ 13.93 billion, indicating a 63.09% increase over the previous year’s figure. ONEOK’s long-term (three to five year) profit growth rate is 6%.
What helps the stock?
ONEOK is well positioned to benefit from long-term fee-based commitments to its Natural Gas Collection and Processing and Natural Gas Liquids segments. The company reported more than 90% of its profits in 2020 in the form of royalties.
It continues to invest in organic growth projects for expansion into existing operating regions and also provides a wide range of services to crude oil and natural gas producers as well as end-use markets. In addition, no customer contributes more than 10% of ONEOK’s total revenues.
In a way, this gives stability to its turnover and in fact, the loss of a single customer is not going to affect the performance of the company. ONEOK Partners is ONEOK’s main growth vehicle and the completion of this buyout should be accretive to its distributable cash flow from 2017 to 2021.
However, strict government regulations and intense competition in the company’s pipeline business are potential restraints on growth. In addition, it does not own all of the land on which its pipelines are located, which increases its risk of incurring high costs to maintain necessary land use.
Zacks Rank and Price Performance
The stock currently carries a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Over the past six months, the company’s shares have risen 40.7% compared to the industry’s 11.4% rise.
Actions to consider
Some higher ranked utilities are UGI Corp. IGU, NewJersey Resources Corp. NJR and Avista Corp. AVA, all currently wearing a Zacks Rank # 2 (Buy).
UGI Corp. posted a surprise profit of 58.23% on average over the last four quarters. The company has a long-term (three to five year) earnings growth rate of 8%.
NewJersey Resources has a long-term profit growth rate of 7.1%. Zacks’ consensus estimate for FY2021 earnings has been revised up 16.8% in the past 60 days.
Zacks’ consensus estimate for Avista’s earnings in 2021 has been revised up 1.4% in the past 60 days. It shows a long-term profit growth rate of 5.44%.
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