Why Is Oneok (OKE) Down 0.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Oneok Inc. (OKE). Shares have lost about 0.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oneok due for a breakout? 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 drivers.

ONEOK Beats Q2 Earnings Estimates, Misses Revenues

ONEOK reported second-quarter 2019 operating earnings of 75 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 7.14%. The bottom line also improved 10.3% on a year-over-year basis.

Notably, higher natural gas liquids (NGL) and natural gas volume processed, increase in average fee rates in the NGLs and natural gas gathering and processing segments as well as increased transportation services in the natural gas pipelines segment drove results.

Total Revenues

Total revenues came in at $2.46 billion, which missed the Zacks Consensus Estimate of $2.70 billion by 9.02%. The top line also declined 17% from $2.96 billion recorded in the prior-year quarter due to lower Commodity sales.

Quarterly Highlights

ONEOK spent $1.62 billion on cost of sales and fuel in the reported quarter, down 25.3% from the year-ago quarter’s tally.

The company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $632.4 million, up 5% year over year.

The company incurred interest expenses of $117.5 million, up from $113.5 million in the prior-year quarter. Operating income was $476.1 million, up 6.2% from $448.4 million recorded in the year-ago quarter.

Financial Highlights

As of Jun 30, 2019, ONEOK had cash and cash equivalents of $273.4 million compared with $12 million as of Dec 31, 2018.

Long-term debt (excluding current maturities) amounted to $10,754 million as of Jun 30, up from $8,873.3 million as of Dec 31, 2018.

The company’s cash flow from operating activities in the first six months of 2019 was $967.9 million, down from $1,002.9 million in the year-ago period.

Capital expenditures (less allowance for equity funds used during construction) amounted to $1,720.2 million in the first six months of 2019, up from $615.3 million in the year-ago period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Oneok has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Oneok has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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