On Tuesday, Citi raised its price target on ONEOK Inc (NYSE:OKE), a prominent midstream service provider in the energy sector, to $102 from the previous $85 while maintaining a Buy rating on the stock.
This adjustment reflects a positive outlook following the company's recent acquisition announcements, which are expected to significantly enhance its financial performance in the coming years.
The firm's analyst cited the acquisitions of ENLC, Medallion, and the expected synergies as key drivers for the revised estimates. According to Citi, these strategic moves could contribute over $2 billion to ONEOK's long-term EBITDA, a figure that represents a greater than 30% increase in the firm's EBITDA estimates for 2025 and beyond.
These acquisitions are also projected to increase ONEOK's free cash flow (FCF) by approximately 20% by 2028, paving the way for substantial capital returns and share buyback activities over the next five years. Citi's model anticipates the repurchase of more than 80 million shares through 2028, which would reduce the overall share count by about 7%, even after the assumed issuance of over 40 million shares to fund the remaining ENLC acquisition.
The analyst further elaborated on the financial implications of the acquisitions, suggesting that they position ONEOK to achieve top-quartile growth prospects. Additionally, the capital payout ratio is expected to increase, growing from around 54% in 2025 to more than 70% by 2028.
The recent announcements by ONEOK have been highlighted as a strategic maneuver that not only promises growth but also strengthens the company's commitment to rewarding its shareholders through capital returns.
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