ONEOK’s Q4 Earnings Lag Estimates; Shares Slip 3.5% After-Hours

ONEOK, Inc. (NYSE: OKE) has reported weaker-than-expected earnings for the fourth quarter of 2021, with the bottom line lagging the consensus estimate by 4.5%. However, revenues surpassed the consensus estimate by 22.3%.

Shares of this midstream services provider lost 3.5% to close at $63 in the extended trading session on Monday.

ONEOK gathers and processes natural gas through its Natural Gas Gathering and Processing segment, while it stores and transports the same via Natural Gas Pipelines segment. The Natural Gas Liquids segment gathers and treats natural gas liquids and provides fractionation and transportation services. ONEOK is headquartered in Tulsa, OK.

Quarterly Highlights

ONEOK’s earnings in the quarter came in at $0.85 per share, up 23.2% year-over-year on the back of improvement in revenues and operating earnings. However, high cost of sales and operating costs played spoilsport. The quarterly earnings lagged the consensus estimate of $0.89 per share.

Revenues stood at $5.42 billion, reflecting a surge of 110.9% from the year-ago quarter and above analysts’ estimates of $4.43 billion.

The quarterly cost of sales and fuel inflated 165.4% year-over-year to $4.32 billion, and operating costs totaled $0.3 billion, up 18.5% from the year-ago quarter. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $0.85 billion, up 14.1% year-over-year.

Annual Highlights

In 2021, ONEOK’s earnings were $3.35 per share, up 135.9% year-over-year. Revenues were $16.54 billion, up 93.6% from the previous year. Natural gas gathered was up 7.2%, with the processing of natural gas increased by 6.4%. Raw feed throughput increased 10.5% year-over-year.

Exiting the year, the company’s cash and cash equivalents decreased 72.1% year-over-year to $0.15 billion. Likewise, its long-term debts (net of current maturities) were down 10.4% to $12.75 billion. Cash flow generated from operations activities totaled $2.55 billion in 2021, reflecting an increase of 34.1% year-over-year. Capital expenditures decreased 68.3% to $0.7 billion.

Management’s Take

ONEOK’s President and CEO, Pierce H. Norton II, said, “This performance provides momentum into 2022 where we expect volume growth across our operations from increased producer activity and strengthening demand for natural gas and NGLs.”

He added, “We continue investing in our core business and focusing on optimizing our assets.”

Projections for 2022

ONEOK projects earnings to be within the $3.45-$4.07 per share range in 2022. It expects adjusted EBITDA to range from $3.47 billion to $3.77 billion.

Natural Gas Liquids raw feed throughput volumes are forecast to increase year-over-year to 1,230-1,350 thousand barrels per day (MBbl/d). Likewise, natural gas gathered volume is estimated to be 2,090-2,370 million cubic feet per share (MMcf/d) and processed volumes to be 1,980-2,240 MMcf/d, up from the respective figures in 2021.

Growth capital expenditures are forecast to be within the $685-$815 million range, and maintenance capital expenditures to be $215-$235 million during the year.

Capital Deployment

In 2021, ONEOK distributed dividends of $1.67 billion, up 3.9% from the previous year.

Wall Street’s Take

Recently, an analyst at Evercore ISI, Todd Firestone, maintained a Hold rating on the stock and increased the price target to $60 (8.12% downside potential) from $50.

Another analyst, Shneur Gershuni of UBS, held a Buy rating on ONEOK. It increased the price target to $75 (14.85% upside potential) from $71.

ONEOK has a Hold consensus rating based on 1 Buy, 9 Holds, and 1 Sell. The average ONEOK price target of $65.33 suggests 0.05% upside potential from the current levels. Over the past year, shares of ONEOK have gained 46.9%.

Risk Analysis

TipRanks Risk Factors tool reveals that OKE stock is at risk mainly from Finance & Corporate factor. This factor contributes 10 risks to the total 15 risks identified for the stock.

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