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Here's Why You Should Add ONE Gas Stock to Your Portfolio

Zacks Equity Research

ONE Gas, Inc.’s OGS regulated earnings, steady demand from residential customers, new rates and systematic capital expenditure will drive performance.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) utility company a promising investment pick for now.

Earnings Surprise & Price Performance

The company has a trailing four-quarter positive earnings surprise of 2.45%, on average.



In the past month, shares of ONE Gas have gained 6.3% compared with the industry’s growth of 4.1%.

Growth Projections

The Zacks Consensus Estimate for the company’s 2019 earnings per share is pegged at $3.50 on revenues of $1.67 billion. The bottom and top lines are expected to rise year over year, which indicate an increase of 7.69% and 2.35%, respectively, from the year-ago reported figures.

The consensus mark for 2020 earnings is pegged at $3.65 per share on revenues of $1.75 billion. While the bottom-line estimate suggests a 4.74% year-over-year increase, that for the top line implies a 4.51% improvement.

The company’s long-term (three to five years) earnings growth is pegged at 6%.

Long-Term Investment Plans

ONE Gas has a strong long-term capital expenditure plan, with $450-$500 million anticipated to be spent every year over the 2020-2023 time period. The company plans to invest $450 million in 2019. Roughly, it intends to invest $2.4 billion over the next five years to strengthen and expand existing operations. Owing to consistent investment in operations, the company’s rate base is expected to improve 6-7% per year, on average, between 2018 and 2023.

Dividend Payment

Regular investment in a fully-regulated company and its ability to generate sufficient cash flows will support management’s plans for rewarding shareholders through average annual dividend increase of 7-9% in the 2018-2023 time period. The targeted dividend payout ratio of the company is 55-65% of net income.

The current dividend yield of the company is 2.13% versus the Zacks S&P 500 composite’s average of 1.79%.

Other Stocks to Consider

A few other top-ranked stocks in the sector are FirstEnergy Corporation FE, Atmos Energy Corporation ATO and MDU Resources Group, Inc MDU. All the stocks currently have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FirstEnergy, Atmos Energy and MDU Resources delivered a positive earnings surprise of 2.87%, 3.18% and 2.79%, on average, respectively, in the last four quarters.

Long-term earnings growth rate for FirstEnergy, Atmos Energy and MDU Resources is pegged at 6%, 7.20% and 7.10%, respectively.

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FirstEnergy Corporation (FE) : Free Stock Analysis Report
 
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
 
ONE Gas, Inc. (OGS) : Free Stock Analysis Report
 
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
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