Why ONEOK Is Expected to Report Strong 4Q15 Results
Analyst recommendations for OKE
Of analysts surveyed by Bloomberg, 40% rated ONEOK (OKE) a “buy” and 47% rated it a “hold.” 13% of analysts rated it a “sell.” The consensus target price for ONEOK in one year is $28.9. Over the same period, the low and high target prices for the stock are $23 and $40, respectively. Currently, ONEOK’s units trade near $20.18. If it attains the median target price within a year, it would mean a 43% price return for investors.
The above table shows recommendations and target prices for ONEOK from some of the brokers surveyed. ONEOK forms 0.9% of the WisdomTree Dividend ex-Financials ETF (DTN). The ETF invests in high-dividend-yielding companies outside the financial sector.
As for its peers, 63% rate Kinder Morgan (KMI) a “buy,” 92% rate Enterprise Products Partners (EPD) a “buy,” and 40% rate Spectra Energy (SE) a “buy.”
Outlook for ONEOK
OKE expects its quarterly dividends to remain flat at the current $0.62 per share. Its MLP, ONEOK Partners (OKS), expects distribution coverage at 1.0 times or better in 2016. This is based on current NYMEX future strip pricing of $40–$45 per barrel of crude oil. It also assumes flat distributions compared to 2015.
ONEOK Partners also aims to bring down its leverage. It expects to achieve a debt-to-EBITDA ratio of 4.2 times or less by late 2016. OKS expects no public equity offerings in 2016 and “well into 2017.”
The company has a project backlog of $4 billion–$5 billion, which is primarily fee-based. If ONEOK indeed attains its targets, this should reflect in its stock price going forward.
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