Jefferies upgrades Oneok to buy amid geopolitical tensions
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 26 2024
0mins
Should l Buy OKE?
Source: Business Insider
ONEOK Inc (OKE) saw a price increase of 3.01% as it reached a 20-day high.
The stock was upgraded from hold to buy by Jefferies, which cited tangible upside potential in the current market environment, particularly due to rising crude oil price risks stemming from geopolitical tensions in the Middle East. This upgrade reflects confidence in Oneok's growth prospects as a leading U.S. pipeline company, with management targeting annual growth of 3% to 4% and a dividend yield of 5%.
This upgrade may attract more investors to Oneok, especially as the company is positioned to benefit from the increasing demand for oil and gas transportation and storage.
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Analyst Views on OKE
Wall Street analysts forecast OKE stock price to fall
12 Analyst Rating
7 Buy
5 Hold
0 Sell
Moderate Buy
Current: 92.960
Low
75.00
Averages
86.00
High
110.00
Current: 92.960
Low
75.00
Averages
86.00
High
110.00
About OKE
ONEOK, Inc. is a midstream operator that provides gathering, processing, fractionation, transportation, storage and marine export services. The Company's segments include Natural Gas Gathering and Processing; Natural Gas Liquids; Natural Gas Pipelines, and Refined Products and Crude. The Natural Gas Gathering and Processing segment provides midstream services to producers in the Rocky Mountain region, the Mid-Continent region, the Permian Basin region and the North Texas region. The Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute natural gas liquids (NGLs) and store Purity NGLs, primarily in the Rocky Mountain region, Mid-Continent region, Permian Basin and Gulf Coast region (including Louisiana). The Natural Gas Pipelines segment transports, stores and markets natural gas. The Refined Products and Crude segment gathers, transports, stores, distributes, blends and markets refined products and crude oil.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Technical Analysis Tool: Comparing the latest share price to the 200-day moving average can provide valuable insights for investors, helping them assess market trends and potential buying opportunities.
- ETF Trading Mechanism: Exchange-traded funds (ETFs) trade like stocks, where investors buy and sell 'units' that can be created or destroyed based on demand, impacting the fund's liquidity and market performance.
- Inflows and Outflows Monitoring: Weekly monitoring of changes in shares outstanding for ETFs experiencing significant inflows or outflows can provide investors with critical information regarding market sentiment and potential investment opportunities.
See More
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- Oil Price Surge Expected: Following Iran's rejection of the U.S. peace plan, experts predict Brent crude prices could soar from $107 to between $150 and $200, indicating the profound impact of Middle Eastern tensions on the global energy market.
- Chevron Stock Rise: Over the past month, Chevron's stock has risen more than 13%, currently trading at $210.65 per share with a market cap of $420 billion, reflecting investor confidence bolstered by its strong upstream operations in North America.
- Oneok's Steady Growth: Oneok's stock has increased by 13.7% in the past month, with projections indicating that by 2026, natural gas and natural gas liquids will account for 35% and 27% of net income respectively, showcasing its diversified midstream assets that mitigate single commodity risks.
- Dividend Returns Attract Investors: Chevron has raised its dividend for 39 consecutive years, currently offering a 3.5% yield, while Oneok provides a 4.5% yield with plans for annual growth of 3% to 4% in the coming years, appealing to investors seeking stable returns.
See More
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- Oil Price Surge: The escalating conflict with Iran has led to a more than 44% increase in Brent crude prices over the past month, rising from $107 to a projected range of $150-$200, which has sparked a rush of investment into energy stocks, indicating strong market confidence in the sector.
- Chevron's Strong Performance: Chevron (CVX) shares have risen over 13% during the same period, with a current price-to-earnings ratio of 10.7, exceeding its five-year average of 8.3, reflecting investor recognition of its robust upstream operations in North America and other regions, particularly amid the closure of the Strait of Hormuz.
- Oneok's Growth Potential: Oneok (OKE) stock has increased by 13.7% in the past month, with its diversified midstream assets and over 90% fee-based revenue model providing strong risk mitigation in transporting natural gas and crude oil, projecting that natural gas liquids and gathering will account for 62% of net income by 2026.
- Commitment to Shareholder Returns: Chevron has raised its dividend for 39 consecutive years, currently offering a 3.5% forward yield, while Oneok provides a 4.5% yield with plans for annual growth of 3% to 4%, demonstrating both companies' strong commitment to returning capital to shareholders.
See More
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- Nasdaq Index Plunge: The Nasdaq 100 experienced its worst one-day drop since October, while the S&P 500 and Nasdaq Composite recorded their worst performance since January 20, indicating heightened market concerns over economic outlook.
- Sector Performance Divergence: Tech stocks have fallen 15.5% from their October highs, whereas the energy sector has risen 10.5% since the onset of the Iran conflict, suggesting a potential reevaluation of asset allocation by investors based on sector resilience.
- Oversold Stocks: Only five stocks in the Nasdaq 100 are considered 'oversold' with an RSI of 30, indicating a bearish market sentiment that may lead to selling pressure, particularly affecting well-known companies like Microsoft and Disney.
- Cruise Line Performance Decline: Carnival Cruise Line's shares have dropped 17.6% over the past three months and 25% since the February 6 high, reflecting a sluggish recovery in the travel industry that could undermine future investor confidence.
See More
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- Board Member Retirement: ONEOK announced that directors Gerald B. Smith and Pattye L. Moore will retire on May 20, 2026, in accordance with the company's mandatory retirement age policy, indicating a shift in corporate governance.
- Tenure and Contributions: Smith has served since 2020 and Moore since 2002, with both directors making significant contributions during their tenure that enhanced the company's governance and strategic direction.
- Management Appreciation: ONEOK CEO Pierce H. Norton II expressed gratitude for their guidance and contributions, emphasizing that their decisions have helped shape ONEOK into a leading midstream infrastructure company, thereby strengthening its market position.
- Company Background: ONEOK, headquartered in Tulsa, Oklahoma, is an S&P 500 company with approximately 60,000 miles of pipeline network, providing transportation services for natural gas, NGLs, refined products, and crude oil to meet domestic and international energy demands.
See More
Iran War Shifts U.S. Energy Demand Dynamics
- Demand Growth Outlook: Wells Fargo analysts anticipate that global buyers will increasingly rely on U.S. liquefied petroleum gas (LPG) and liquefied natural gas (LNG), which will drive export expansions for companies like Enterprise Products (EPD), Energy Transfer (ET), and Targa Resources (TRGP), enhancing their market share.
- Enterprise Products Upgrade: Enterprise Products (EPD) was upgraded from Equal Weight to Overweight with a price target raised from $40 to $42, reflecting optimistic expectations for growth in LPG export demand, which is expected to significantly boost its sales volume.
- ONEOK Rating Boost: ONEOK (OKE) was also upgraded to Overweight with a price target increased from $81 to $100, primarily based on widening near-term spreads and increased supply from producers responding to higher prices, which is expected to enhance its market performance.
- Kinetik Holdings Positive Outlook: Kinetik Holdings (KNTK) was raised from Equal Weight to Overweight with a price target increased from $47 to $52, reflecting strong expectations for robust five-year growth in gas and NGL supply from the Permian Basin.
See More
