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On Thursday, UBS reaffirmed its Buy rating and $147.00 price target for ONEOK Inc (NYSE: NYSE:OKE), a prominent player in the midstream service sector, specializing in natural gas and natural gas liquids. With a substantial market capitalization of $60 billion and impressive revenue growth of 22.75% over the last twelve months, ONEOK has established itself as a key player in the energy infrastructure space. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, suggesting investors should carefully consider entry points. UBS’s analysis anticipates ONEOK’s first-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) to reach approximately $1,856 million, a slight increase from the adjusted $1,845 million in the fourth quarter of 2024. This projection aligns with the company’s strong financial health score of "GOOD" on InvestingPro, which offers comprehensive analysis through its Pro Research Report, one of 1,400+ detailed company analyses available to subscribers.
The fourth quarter of 2024 included exceptional items such as a $227 million gain from the sale of an interstate natural gas pipeline to DTM and a $98 million gain in the Refined Products and Crude segment due to higher earnings on the BridgeTex Pipeline from the non-recurring recognition of deferred revenue. Excluding these one-time gains, the adjusted EBITDA for the fourth quarter would have been $1,845 million.
UBS analysts project that ONEOK’s first-quarter EBITDA for 2025 will be influenced by several factors, including the half-quarter impact of the ENLC+ Medallion acquisition, partially offset by the sale of assets to DTM, as well as seasonal variations and weather conditions.
In the detailed segment analysis, UBS estimates the Natural Gas Gathering and Processing segment’s Adjusted EBITDA at $509 million, an increase from the previous quarter’s $489 million. The Natural Gas Liquids segment is expected to see a decrease in Adjusted EBITDA to $607 million from $696 million in the fourth quarter of 2024. The Natural Gas Pipelines segment Adjusted EBITDA is projected to be $158 million, down significantly from $417 million in the previous quarter. The Refined Products and Crude segment is also expected to experience a slight decrease in Adjusted EBITDA to $581 million from $603 million.
For the first quarter of 2025, UBS models a free cash flow after dividends (FCFaD) of negative $10 million, which contrasts with the $280 million recorded in the last quarter of 2024. The firm’s continued confidence in ONEOK is reflected in the maintained Buy rating and price target, indicating a positive outlook on the company’s stock performance. The stock currently offers an attractive dividend yield of 4.07%, with dividend growth of 7.85% over the last twelve months. InvestingPro subscribers can access additional insights, including exclusive ProTips about ONEOK’s dividend sustainability and growth potential.
In other recent news, ONEOK Inc. reported strong financial results for the fourth quarter of 2024, with net income reaching $923 million, or $1.57 per share, and a full-year net income of $3 billion, or $5.17 per share. The company’s strategic expansions and acquisitions have significantly bolstered its competitive position, contributing to robust growth in adjusted EBITDA, which was nearly $2.2 billion for the quarter and over $6.7 billion for the full year. Looking ahead, ONEOK anticipates an 8% increase in earnings per share for 2025, projecting a midpoint of $5.37, alongside a 21% rise in adjusted EBITDA to $8.225 billion.
Stifel analysts recently raised ONEOK’s stock price target to $110 from $106, maintaining a Buy rating, following the company’s quarterly financial results, which met expectations when excluding certain items. The company also announced a new LPG export project, highlighting its strategic location and brownfield economics. Despite some challenges with the guidance midpoint falling short of Wall Street’s expectations, ONEOK remains focused on leveraging synergies from recent acquisitions and expects high growth capital expenditure in 2025, with a decrease anticipated in subsequent years. The company continues to prioritize operational efficiency and value chain integration, as emphasized by its executives.
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