ONEOK Stock is Having a Great Year, Is Now the Time to Invest?
ONEOK stock (NYSE: OKE) is a pure-play in natural gas. The company operates a 40,000-mile natural gas pipeline network throughout the U.S. More than 10% of all the natural gas pumped in the U.S. relies on ONEOK’s pipelines. ONEOK’s natural gas pipeline is a key competitive advantage for the company.
ONEOK and other natural gas companies have had a great year in 2022. After the conflict between Russia and Ukraine began, natural gas prices started to rise. Much of the rise in natural gas prices was caused by sanctions against Russian natural gas.
Russia is one of the world’s largest makers of natural gas. So, as sanctioning countries stopped buying Russian oil, the world’s natural gas supply fell drastically. Since demand for natural gas was still high and supply fell, prices skyrocketed. As that happened, ONEOK’s profits also skyrocketed.
ONEOK is a major supplier to the petrochemical industry. The natural gas that the company supplies to its customers is used for manufacturing many different products. ONEOK’s customers need a steady supply of natural gas to run their businesses. More than 200 of their customers are connected directly to ONEOK’s pipeline.
In addition to its pipeline business, ONEOK also pumps natural gas. ONEOK pumped and processed more natural gas last year than in many years. The company has over three million acres of land in the Rocky Mountains and central U.S. states.
Is ONEOK Stock a Good Buy?
According to analysts, ONEOK stock is a ‘Buy.’ Thirteen analysts that made recommendations about ONEOK stock over the last three months think highly of the stock.
A quick valuation of ONEOK stock shows a P/E ratio of 20x. Interestingly, the stock’s current P/E ratio is much lower than its average P/E over the last five years. The discrepancy may mean that ONEOK stock is cheap. It may also mean that the company’s earnings are growing faster than its stock price over the last year.
On top of that, the stock paid an annual dividend of about $3.74 last year. When you compare the dividend to the company’s share price, shareholders get a dividend yield of over 5.5%. The dividend yield is attractive, especially after the stock has risen 22% over the last year. In 2000, the company paid a dividend of $.31. Since then, ONEOK has increased the dividend by an annual compounded rate of 13%.
Investors have been rewarded this year with more than just the hefty dividend. The stock’s rise over the past year compares favorably to other stocks. for instance, the S&P 500 stock index is down 2.5%. That means OKENOK stock has done better than the S&P 500 index by nearly 20%.
ONEOK Stock Forecast
The average 12-month price target for ONEOK stock is $72.18. The price target is based on analyst forecasts over the last three months.
ONEOK stock is currently about $67. The high mark is nearly 21% higher than the current stock price. The average price target implies a 7.5% upside for the stock. Interestingly, the highest 12-month price target is $81.
On the other hand, the lowest price target is $64, which implies a downside of about 4.5%. Overall, the analyst’s opinion of ONEOK stock seems to be positive.
In March, the company put out an investor update about the company. In the investor update, ONEOK said they believe net income for the full year 2022 will be between $1.55 million and $1.83 million. Net income at that level translates to earnings per share between $3.45 and $4.07.
ONEOK stock analysts tend to agree with the company. On average, seven analysts making earnings per share forecasts for the company think they will be $3.88 for the year. Two analysts increased their forecast over the last four months, and two decreased their forecast.
The company also thinks it will continue to see higher volumes of natural gas liquids from its Rocky Mountain region. In addition, ONEOK should see benefits in 2002 from projects they completed in 2021.
If you’re interested in following ONEOK stock, the company should report its next quarterly financial results sometime in early August. Although the company has not officially set a date for the results, you can find more information and sign up for e-mail alerts about the company on their website.
ONEOK Stock Earnings
ONEOK reported $.87 in earnings per share for the first quarter of 2022. Analysts had forecast that the company would report earnings per share of $.89. ONEOK missed the forecast by only $.02.
In May, ONEOK put out a press release about its financial results for the first quarter of 2022. The press release said that the company had a net income of $391.2 million. It also said that earnings per share were up 24% after excluding the impact of Winter Storm Uri.
Natural gas liquid volumes from its Rocky Mountain region increased by 24%. On top of that, the company’s processed natural gas from the region increased by 11%.
In the press release, CEO Pierce Norton II said, “ONEOK’s first quarter 2022 results were driven by higher NGL and natural gas volumes. Current events continue to demonstrate the importance of natural gas and NGLs in a long-term energy transformation and highlight the critical role ONEOK plays in providing essential energy products and services.”
After the company put out its first-quarter results, managers hosted a webcast to talk about the results. When the managers finished talking, they took questions from listeners. You can find a link to a replay of the webcast here.
ONEOK has said that it presented at several investor meetings recently. At the meetings, managers from the company shared information about ONEOK.
Over the last few months, ONEOK presented at the Bernstein Strategic Decisions Conference, Citi Global Energy Conference, U.S. Capital Advisors Midstream Corporate Access Day and the Mizuho Energy Summit.
About BJ Cook
BJ Cook is a long-time stock nerd. He has held several roles in the equity research world and earned the right to use the CFA designation in 2014. When he’s not writing for Investment U, you can find him searching for new investment ideas. Outside the investment community, BJ is a die-hard Cubs fan.