ONEOK Beats Q1 Earnings, Down Y/Y - Analyst Blog

ONEOK Inc. OKE reported first-quarter 2014 adjusted earnings per share of 42 cents, surpassing the Zacks Consensus Estimate of 39 cents by 7.7%. However, quarterly earnings decreased 22.2% from 54 cents a year ago due to a rise in cost of sales and fuel, and higher share counts.

Excluding total gains of 3 cents related to the severance of the natural gas distribution business into a separate publicly traded entity, ONE Gas, Inc. (OGS) and the wind down of the Energy Services segment, the company reported GAAP earnings of 45 cents per share compared with 54 cents per share a year ago.

Total Revenue

In first-quarter 2014, ONEOK Inc. posted total revenue of $3,163.3 million, lagging the Zacks Consensus Estimate of $3,403 million by 7%. Reported revenues surged 25.6% year over year, primarily on the back of higher natural gas volumes and natural gas transportation and storage revenues, and wider natural gas liquids NGL location and product price differentials.

Operating Highlights

In the quarter under review, ONEOK Inc.'s total operating expenses were $216.5 million compared with $196.4 million a year ago. A 10.2% rise was primarily driven by higher operations and maintenance expenses, and increases in depreciation expenses and general taxes.

The company's quarterly operating income was $294.1 million, up 68.3% year over year primarily due to an increase in natural gas volumes gathered, processed and sold, and NGL sold.

Interest expenses jumped 47.1% year over year to $94.9 million due to $1.25 billion debt issuance by the company's subsidiary ONEOK Partners L.P. OKS.

Financial Condition

ONEOK Inc.'s cash and cash equivalents, as of Mar 31, 2014, were $210.2 million compared with $145.6 million as of Dec 31, 2013.

As of Mar 31, 2014, long-term debt (excluding current maturities) was $7,199 million versus $7,753.7 million as of Dec 31, 2013.

In the first three months of 2014, the company's cash provided by operating activities was $490.4 million, higher than $471.5 million in the year-ago comparable period.

ONEOK Inc.'s capital expenditure was $429.5 million in first-quarter 2014, down from $501.1 million in the prior-year comparable period.

Guidance

ONEOK reiterated its 2014 guidance provided on Dec 2, 2013. The company is expected to allocate $560 - $640 million for the 2014 dividend payout. The company plans to increase the 2014 annual dividend by 53% to $2.33 per share, subject to the board's approval.

At the Peer

Sempra Energy SRE reported first-quarter 2014 earnings of $1.03 per share, surpassing the Zacks Consensus Estimate of 94 cents by 9.6%.

Zacks Rank

ONEOK currently has a Zacks Rank #3 (Hold).