On Thursday, BofA Securities updated its outlook on ONEOK Inc (NYSE:OKE), a prominent player in the midstream service sector, by increasing its stock price target to $88.00, up from the previous $86.00. The firm sustained its Buy rating on the stock, signaling confidence in the company's performance.
Despite a challenging first quarter marked by weather disruptions in the Bakken region, which adversely affected the gathering and processing (G&P) and natural gas liquids (NGL) volumes, ONEOK has adjusted its EBITDA guidance for 2024.
The company's first-quarter EBITDA of $1,441 million did not meet expectations, falling short by 2% and 4% compared to consensus and BofA Securities' forecasts, respectively. Still, the midpoint of the company's 2024 EBITDA guidance was raised by $75 million, now ranging from $6,025 million to $6,325 million.
The revision in guidance is attributed to several factors, including anticipated strong volume growth in the Bakken and refined products, G&P rates exceeding initial projections, conservative synergy estimates from the recent merger with Magellan Midstream (NYSE:MMP) Partners, and increased ethane recovery in the Bakken. BofA Securities anticipates that ONEOK will surpass the conservative synergy estimates of $175 million for 2024.
BofA Securities has also adjusted its EBITDA estimates for ONEOK for the years 2024, 2025, and 2026, taking into account the higher G&P rate now factored into their model. By 2026, the firm expects ONEOK's EBITDA to surpass $7 billion as the majority of the commercial synergies from the merger are realized.
The enhanced EBITDA projections have led to the rise in the price objective for ONEOK shares, moving from $86 to the new target of $88. BofA Securities reiterates its Buy rating, reflecting a positive outlook on the company's financial prospects.
InvestingPro Insights
In light of BofA Securities' updated outlook on ONEOK Inc, current real-time data from InvestingPro provides additional context for investors considering the stock. With a Market Cap of $44.89 billion and a P/E Ratio of 18.29, ONEOK appears to be valued reasonably in the market.
The company's PEG Ratio of 0.4 suggests that it could be an attractive investment when considering its earnings growth rate. Moreover, ONEOK's Dividend Yield of 5.15% is noteworthy for income-seeking investors, especially considering the recent Dividend Growth of 5.88%.
The recent performance metrics show a 1 Year Price Total Return of 29.58%, indicating a strong upward trend in the stock's value. This is bolstered by a Price % of 52 Week High at 94.07%, showing that the shares are trading near their peak value over the past year. Investors should also note the Fair Value estimations, with InvestingPro's Fair Value at $70.81, providing a conservative perspective compared to the Analyst Targets of $82.45.
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