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ONEOK Reports Strong Q3 Results, Beats Estimates

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ONEOK’s third-quarter performance

ONEOK (OKE) reported its third-quarter results on October 30 after the markets closed. The company’s EPS of $0.75 beat the consensus estimates of $0.71 for the quarter. ONEOK also beat its revenue estimates for the quarter by ~7.0%. The company’s third-quarter operating income rose 40% YoY (year-over-year). The NGL (natural gas liquids) and natural gas volumes growth across the company’s assets drove its earnings growth for the quarter.

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Growth drivers

The above graph shows ONEOK’s segmental EBITDA over five years. The company’s earnings growth in the third quarter was driven by its Natural Gas Liquids segment, which reported a 36% YoY rise in the EBITDA. Higher optimization and marketing earnings and increased gathering and fractionation volumes mainly in the STACK and SCOOP areas contributed to the Natural Gas Liquids segment’s earnings growth.

ONEOK’s Natural Gas Gathering and Processing segment’s earnings grew 12% YoY, while its Natural Gas Pipelines segment’s earnings grew 3% YoY.

2018 guidance

ONEOK has raised its financial guidance for 2018. The company raised its adjusted EBITDA guidance midpoint for 2018 by 5% to $2.470 billion from the earlier guidance of $2.350 billion. ONEOK raised its net income guidance for 2018 by 9%. The guided increase in the EBITDA is expected to be driven by ONEOK’s Natural Gas Liquids segment.

ONEOK has raised its third-quarter dividend 3.6% over the previous quarter. Currently, the stock is trading at a yield of ~5.4%. In comparison, Enterprise Products Partners (EPD), Targa Resources (TRGP), and Williams Companies (WMB) are trading at yields of 6.5%, 7.3%, and 5.6%, respectively.

To learn how Kinder Morgan (KMI) fared in the third quarter, read Decoding Kinder Morgan’s Third-Quarter Earnings.

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