Citi has raised its price target on ONEOK Inc (NYSE: OKE) to $102 from $85, maintaining a Buy rating on the stock. The adjustment comes after the company's recent acquisition announcements, which are anticipated to significantly improve its financial performance in the future.
Key drivers for the revised estimates include the acquisitions of ENLC and Medallion, along with expected synergies. Citi projects that these strategic moves could add over $2 billion to ONEOK's long-term EBITDA, representing a more than 30% increase in EBITDA estimates for 2025 and beyond.
The acquisitions are also expected to boost ONEOK's free cash flow by around 20% by 2028, allowing for substantial capital returns and share buybacks over the next five years. Citi's model forecasts the repurchase of over 80 million shares through 2028, reducing the overall share count by about 7% despite the issuance of more than 40 million shares to fund the remaining ENLC acquisition.
Analysts believe that these acquisitions position ONEOK for top-quartile growth prospects and anticipate an increase in the capital payout ratio from approximately 54% in 2025 to over 70% by 2028.
Overall, the recent announcements by ONEOK are seen as a strategic move that not only promises growth but also underscores the company's commitment to rewarding shareholders through capital returns.
Analysis:
Citi's price target raise and positive outlook on ONEOK following its acquisitions indicate a strong belief in the company's future growth potential. The expected increase in EBITDA and free cash flow, along with plans for share buybacks, suggest a favorable financial trajectory for investors. With a focus on rewarding shareholders and achieving top-quartile growth, ONEOK's strategic moves position it as a promising investment opportunity in the energy sector.