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ONEOK Inc. (NYSE: OKE)

Originally recommended on Nov. 17/08 (IWB #2841) at $26.88. Closed Friday at $35.71. (All figures in U.S. dollars.)

OKE dropped to a five-year low of $18.10 in early March but it has recovered strongly and is now trading at about double that level. The company is among the largest natural gas distributors in the United States, serving more than two million customers in Oklahoma, Kansas, and Texas. It owns 45.1% of ONEOK Partners, L.P. (NYSE: OKS), which is one of the largest publicly traded master limited partnerships in the U.S. However, OKE itself is a corporation, not an MLP, so does not have the tax complications that the master partnerships present to Canadian investors.

The company reported second-quarter operating income of $154.8 million, compared with $173 million a year ago. The reduction was primarily the result of significantly lower realized commodity prices in the ONEOK Partners segment, the accompanying press release said. However, earnings per share (EPS) of 39c were unchanged from a year ago.

ONEOK updated its full-year EPS guidance to the range of $2.40 to $2.70 per diluted share from $2.25 to $2.75 previously. That raised the midpoint to $2.55 per share from $2.50 per share. Management obviously feels that there are better times ahead.

Again, there is no compelling reason to sell but we have a gain of 32.8% if you want to take some profits.

Action now: Take half-profits.

Source: ONEOK: Management Sees Better Times Ahead