Mizuho raises ONEOK stock price target to $95 on volume trends

Mizuho raised its ONEOK (OKE) price target to $95 from $91 (Neutral) as it lifted 2026–2029 adjusted EBITDA estimates to $8.34B/$8.73B/$9.02B/$9.22B, up from $8.20B/$8.71B/$8.99B/$9.14B, citing stronger Permian gathering/processing and better NGL throughput. For Q2’26, it raised adjusted EBITDA to $2.05B (+$80M) and expects seasonal earnings build supported by higher volumes and favorable gas transportation differentials. The stock trades around $89.50 and remains supported by dividend yield of 4.78%, though recent Q1’26 results still missed (EPS $1.23 vs $1.31; revenue $8.5B vs $8.56B) despite raised full-year guidance.

Analysis

The incremental upside here is not from “better midstream” in the abstract; it is from a narrowing gap between reported volumes and sell-side skepticism. OKE looks levered to a favorable mix of Permian throughput, Bakken resilience, and gas/NGL optimization, which matters because these businesses re-rate when EBITDA estimates move faster than the yield does. The market has already paid up for quality, so the next leg likely comes from estimate revisions rather than multiple expansion, limiting the upside unless second-quarter volumes surprise materially.

The key second-order issue is that one of the current tailwinds is self-liquidating: if Waha-to-Katy differentials normalize as takeaway comes online, a chunk of the near-term earnings lift fades. That makes the setup more tactical than structural over 6-18 months. Competitively, names with more direct exposure to Permian/NGL flow and less dependence on spread capture should be better positioned to defend margin, while yield-only midstream holders risk underperforming if the market decides the “easy” re-rating has already happened.

Consensus seems to be extrapolating a clean earnings runway, but the hidden risk is that guidance quality matters more than headline EBITDA. If Q2 confirms volume inflection while normalized basis differentials compress, the stock can still go sideways despite a beat because the forward multiple already reflects stronger 2026-2029 numbers. The thesis is falsified if Permian processing volumes fail to inflect, Bakken volumes roll over seasonally, or if the company’s optimization benefit proves transitory versus sustained structural throughput growth.

Key Decisions for Investors

• Hold/accumulate OKE on pullbacks only; upside is mostly estimate-driven, so the best entry is after any post-earnings digestion rather than chasing a 25% YTD winner. Risk/reward is attractive only if the next print confirms volume inflection and no meaningful guidance haircut.
• Pair trade: long OKE / short KMI over the next 1-3 months. OKE has clearer near-term EBITDA revision torque from Permian/Bakken/NGL mix, while KMI is less exposed to the same revision path; use a stop if OKE underperforms KMI by ~5% post-earnings.
• For more defensive exposure, use a call spread in OKE rather than outright stock ahead of Q2 2026 earnings. This caps downside if basis differentials normalize faster than expected, while still monetizing a favorable report; target 2-3x premium at risk.