Why ONEOK Partners LP Might Outperform

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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of ONEOK Partners LP (NYSE: OKS  ) climbed 1% this morning after Goldman Sachs upgraded the natural gas storage and transportation company from "sell" to "neutral".

So what: Along with the upgrade, analyst Theodore Durbin raised his price target to $57 (from $55), representing about 8% worth of upside to yesterday's close. While momentum traders might be turned off by the stock's sluggish action in 2013, Durbin believes that ONEOK's announcement this morning -- it will spend up to $780 million on projects in the oil-rich area around Williston, ND -- should give its prospects a decent boost going forward.

Now what: Goldman believes that ONEOK's risk/reward trade-off is pretty balanced at this point. "On the announcement, we lower our 2015 distributable cash flow (DCF) estimate for OKS by 5% on higher financing costs, maintain 2016, but raise our 2017 estimate by 6% assuming 6x EBITDA multiple project returns, similar to other 'bolt-on' organic returns," noted Goldman. With the stock still off about 15% from its 52-week highs and sporting a 5%-plus dividend yield, ONEOK Partners is definitely worth a look. 

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Related Tickers

9/28/2016 11:15 AM
OKS $37.82 Down -0.40 -1.05%
ONEOK Partners CAPS Rating: *****