We reiterate our Neutral recommendation on
). In second-quarter 2012, the company's earnings per share and
revenue fell short of the Zacks Consensus Estimates, primarily due
to continued pressure from the Energy Services segment.
OGE ENERGY CORP (OGE): Free Stock Analysis
ONEOK INC (OKE): Free Stock Analysis Report
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We know that ONEOK's operations are subject to several federal,
state, and local regulations, as well as extensive environmental
rules. The utility regulatory authorities in Oklahoma, Kansas and
Texas regulate many aspects of the company's utility operations
including customer service and the rates charged to customers.
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 approvals.
In addition, ONEOK's business and products, particularly propane is
weather sensitive. This seasonality along with deviations in
weather conditions may cause variation in the company's earnings
and short-term cash requirements.
Apart from these negative factors, ONEOK maintains a strong
financial position, equipped with structured and flexible fund
growth, either organically or inorganically. Strong cash flow
generation from its operating segments provides the company
flexibility along with pursuing more investment options.
We know that transportation of crude oil or natural gas to the
marketplace through rail or truck, specifically in the Williston
Basin, is challenging due to harsh and volatile weather. We believe
installation of Bakken Crude Express Pipeline will provide ONEOK
with a reliable and cost-effective means of transportation compared
to other alternatives. It is expected to act as the company's
future growth platform with strong economic feasibility to provide
superior services to producers and refiners.
In addition, we believe that ONEOK's future financial performance
should get a boost from deployment of $1 billion in additional
projects and strong contribution from the ONEOK Partners segment.
However, we are concerned about volatile credit markets and
unpredictable commodity prices, which might negatively impact the
company's future financial and operational performance.
ONEOK Inc. currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating.
Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company,
operating as a natural gas distributor, primarily in the United
States. The company competes with
OGE Energy Corp.