ONEOK Inc (OKE) PT Raised to $95 at Scotiabank

Scotiabank analyst Holly Stewart raised the price target on ONEOK Inc (NYSE: OKE) to $95.00 (from $89.00) while maintaining a Sector Perform rating.

The analyst commented: "Following the company’s brief conference call and spending more time digging into the numbers, we now take a more mixed view. We reiterate that growing the Permian liquids value chain is positive and the correct strategic move. However, while Brazos adds scale quickly, the price of said scale leaves us wanting. What’s more, the guided leverage mark of 3.25x implies $8.6B in EBITDA pro-forma (Street at $8.6B pre-deal).

Our channel checks suggest some dislocations between metrics which are amplified by the data provided in the press release. As asked on the call, how do you reconcile implied earnings with implied fees? We suspect a combination of drivers to this paradox with the associated downstream earnings potential and commodity margin leading the way (we see T&F upside potential of ~$140M in FY27, and T&F+E upside of ~$250M in FY28).

We also reiterate our initial view that the financing deal with Apollo is neutral at best as it raises some important questions - why this vs. traditional DCM if Brazos is that accretive and why carve out an incremental 0.75x of balance sheet capacity? While the strategic rationale is positive, we opt to wait and see how things unfold for now and reiterate our Sector Perform rating."

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