Argus Downgrades ONEOK To Hold, Cites 'Strong Run Up'

Loading...
Loading...

ONEOK, Inc. OKE share price has surged nearly 95 percent since January, and Argus’ Stephen Biggar believes that the stock appears fully valued at the current levels.

Biggar downgraded the rating on the company from Buy to Hold.

Stock Valuation

“In our view, the recent modest recovery in oil prices is already reflected in the OKE share price,” the analyst mentioned.

Biggar believes that ONEOK has benefited from the positive contract and volume trends. The company has also restructured several of its contracts to fee-based, from percent-of-proceeds, which are expected to make it less sensitive to fluctuations in energy prices and volumes.

Some Concerns

However, the analyst expressed concern regarding the debt levels and capital spending at Oneok Partners LP OKS, given that the MLP accounts for 100 percent of ONEOK’s cash flow.

“OKE management has noted that OKS may need to issue new stock in late 2017, which would be dilutive to EPS,” according to the Argus report.

At the same time, Biggar expressed optimism regarding ONEOK’s favourable market positioning, enhanced earnings stability and attractive dividend yield of about 5.4 percent, which is more than covered by the company’s current cash flow.

The EPS estimate for 2016 has been raised from $1.75 to $1.76 “to reflect the impact of recent volume growth, higher oil prices, and contract restructuring.”

Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorDowngradesAnalyst RatingsArgusStephen Biggar
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...