ONEOK Inc. OKE will release first-quarter 2015 financial results after the market closes on May 5, 2015. In the prior quarter, the company reported a positive earnings surprise of 21.62%. Let’s see how things are shaping up for the first quarter.

Factors to Consider

ONEOK Inc. is the sole general partner of ONEOK Partners, L.P. OKS with a 37.8% ownership as of Dec 31, 2014. The partnership is engaged in natural gas gathering and processing, natural gas liquids and natural gas pipelines.

ONEOK provides managerial support as well as resources to ONEOK Partners to carry out the partnership’s operations. Successfully executed projects enhance cash distribution leading to greater financial flexibility for ONEOK.

During the quarter, ONEOK Partners increased its existing credit facility to $2.4 billion from $1.7 billion. The credit facility, which expires in Jan 2019, will support the partnership's capital expenditure budget of approximately $1.2 billion this year, as well as meet other general partnership purposes.

ONEOK Inc.’s systematic investment in growth projects and strategic acquisitions, through its unit ONEOK Partners L.P., is commendable. The company’s practice of paying dividends at regular intervals is backed by a stable cash generating capacity. In Jan 2015, ONEOK, Inc. increased its quarterly cash dividend by 3% to 60.5 cents per share, resulting in an annualized cash dividend of $2.42 per share.

However, the decline in commodity prices is likely to have a negative impact on the net realized prices of natural gas, NGLs and condensate. As a consequence, margins are expected to be under pressure.

Earnings Whispers?

Our proven model does not conclusively show that ONEOK will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: ONEOK currently has a negative Earnings ESP because the Most Accurate estimate stands at 37 cents, while the Zacks Consensus Estimate is pegged higher at 38 cents. This equates to a difference of -2.63%.

Zacks Rank: ONEOK’s Zacks Rank #4 (Sell) when combined with a negative Earnings ESP makes an earnings beat difficult. As it is, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some firms in the same sector worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

Sempra Energy SRE has an earnings ESP of +12.21% and carries a Zacks Rank #3.

Southwest Gas Corp. SWX has an earnings ESP of +1.26% and carries a Zacks Rank #3.