On Thursday, Seaport Global Securities raised its rating on ONEOK Inc (NYSE:OKE) from Neutral to Buy and established a price target of $76.00. The firm cited several reasons for the positive outlook including the company's announcement of a dividend increase for 2024, the initiation of a $2.0 billion stock buyback program, and a strategy aimed at long-term dividend growth and enhanced shareholder returns.
Seaport Global Securities highlighted ONEOK's effective leverage reduction efforts, as evidenced by its strategic purchase of outstanding notes in the fourth quarter. The firm anticipates that ONEOK will deliver strong fourth-quarter results. Despite some expected short-term irregularities due to the integration of MMP and seasonal variations in the Bakken region, the analyst believes that investors will shift their focus to the company's promising full-year outlook for 2024.
The acquisition of MMP is also seen as a beneficial move for ONEOK, bringing more diversity to the company's operations and potentially mitigating the impact of weather-related volatility. Seaport Global Securities pointed out that ONEOK's shares have underperformed compared to peers like TRGP and WMB by approximately 4.5% since the January 17 announcement detailing the dividend increase, buyback program, and long-term shareholder return strategy.
The upgrade to a Buy rating reflects confidence in ONEOK's future performance and its ability to navigate the operational challenges ahead. With a new price target of $76, Seaport Global Securities signals its belief in the value proposition that ONEOK presents to investors.
InvestingPro Insights
Following the recent upgrade by Seaport Global Securities, investors are taking a closer look at ONEOK Inc (NYSE:OKE) and its financial health. According to InvestingPro data, ONEOK boasts a market capitalization of $40.06 billion, highlighting its significant presence in the energy sector. The company's P/E ratio stands at a competitive 12.54, suggesting that its stock may be trading at a low price relative to near-term earnings growth, which is an InvestingPro Tip that could be particularly attractive to value investors.
ONEOK's commitment to shareholder returns is evident not only in its recent dividend increase but also in its track record of maintaining dividend payments for 54 consecutive years, a testament to its financial stability and reliability as an income-generating investment. This aligns with the InvestingPro Tip that highlights the company's low price volatility, providing a level of predictability and security for investors looking for stable returns.
Moreover, the company's financials over the last twelve months as of Q1 2023 show a gross profit of $4.953 billion and an operating income margin of 17.04%, reflecting a robust operational performance. As investors evaluate ONEOK's potential, they can access additional InvestingPro Tips to gain deeper insights. There are currently 5 additional tips listed on InvestingPro for ONEOK, which can be found at https://www.investing.com/pro/OKE. Interested readers can use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, enhancing their investment decision-making with a comprehensive suite of tools and data.
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