Why Oneok Fell Today
Key Points
Oneok beat earnings expectations but gave underwhelming guidance.
While natural gas demand should remain resilient, the company has also hedged its exposure at lower prices than last year.
Still, Oneok's largely fee-based revenue should keep its near-5% dividend intact.
Shares of natural gas-focused midstream company Oneok (NYSE: OKE) fell on Tuesday, falling as much as 7% before recovering to a 4.9% decline as of 3:09 p.m. EDT.
Oneok reported earnings last night, and while the company actually beat Wall Street's expectations for the fourth quarter, its 2026 guidance left investors wanting.
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Oneok forecasts meager profit growth in 2026
In the fourth quarter, Oneok reported revenue of $9.07 billion and adjusted (non-GAAP) earnings per share of $1.55. While the adjusted EPS figure actually declined slightly in the year-ago quarter, the decline was partly due to adverse winter weather that caused plant delays. Both of those numbers beat analyst expectations.
However, on the forward outlook, Oneok only forecasts $8.1 billion in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for 2026 -- barely higher than the $8.085 billion it recorded in 2025.
Some might wonder why that would be, given the extreme demand for natural gas to power AI data centers and LNG exports abroad. Yet while Oneok forecasts volume increases in the year ahead, it also anticipates pricing pressure due to lower hedged natural gas prices and lower location differentials, which can be affected by various factors, including supply competition. Of note, natural gas prices have been highly volatile but are currently much lower than they were one year ago. While Oneok's revenue is fee-based chiefly, it is still exposed to natural gas price fluctuations within 10% to 15% of its business.
Image source: Getty Images.
Oneok's high dividend should be steady, with low growth
Even though natural gas is likely to see high demand from AI going forward, warmer temperatures due to climate change could also offset that demand, given that natural gas demand is traditionally heavily exposed to heating.
Yet while the underlying commodity is likely to be volatile, Oneok's 4.8% dividend should remain safe, given its largely fee-based model and strong position in Oklahoma, Texas, and the Midwest, which is home to lots of data center activity and leads to LNG export terminals. Additionally, Oneok increased its dividend by 4% last year, and investors should probably expect additional annual increases at least in line with, or higher than, inflation.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.
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