We reaffirm our Neutral recommendation on
) due to stringent utility regulations, over-reliance on weather
patterns, fluctuating commodity prices and volatile credit
markets. We believe these negatives may be to some extent
mitigate the company's strong financial position, steady progress
at its several growth projects and continuous effort toward
strengthening its existing businesses through strategic
In the third quarter of 2012, ONEOK's earnings per share and
revenue fell short of the Zacks Consensus Estimates, primarily
owing to lower sales numbers from all of its operating segments,
lower realized natural gas and natural gas liquids prices, and
decline in storage and marketing margins.
Utility providers like ONEOK follow several federal, state, and
local regulations associated with customer service and the rates
charged to customers, and extensive environmental rules. The
companies invest substantial amounts to follow those guidelines.
ONEOK's profitability principally depends on its ability to
realize costs associated with providing energy and other
commodities to customers by obtaining the required regulatory
In addition, ONEOK's business and demand of products,
particularly propane, is weather sensitive. This seasonality
along with variations in weather conditions may cause disparity
in the company's financial results.
On the flip side, ONEOK maintains a strong financial position,
equipped with structured and flexible growth through either
organic or inorganic route. Steady cash flow generation from the
company's operating segments provide it flexibility along with
more investment options.
Considering positive and negative factors, we prefer ONEOK Inc.
to have a short-term Zacks #3 Rank (Hold rating). One of its
OGE Energy Corp.
) has a short-term Zacks #4 Rank (Sell rating).
Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company,
operating as a natural gas distributor, primarily in the U.S.
With a market capitalization of $8.85 billion, the company has
4,795 full-time employees.
OGE ENERGY CORP (OGE): Free Stock Analysis
ONEOK INC (OKE): Free Stock Analysis Report
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