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Here's Why You Should Add ONE Gas (OGS) to Your Portfolio

Zacks Equity Research

ONE Gas Inc. OGS is poised for growth on the back of regulated earnings, steady demand from residential customers, new rates and systematic capital expenditure to strengthen operations.

Growth Projections: The Zacks Consensus Estimate for 2019 earnings per share is pegged at $3.49 on $1.67 billion revenues. The bottom and top lines indicate a 7.38% and 2.22% year-over-year increase, respectively.

The consensus mark for 2020 earnings is pegged at $3.62 per share on revenues of $1.73 billion. While the bottom line translates to a 3.84% increase, the top line also suggests a 3.84% improvement on a year-over-year basis.

Impressive Price Performance: Shares of ONE Gas have gained 16.7% in the past 12 months versus the industry’s 8.9% growth and the S&P 500 Index’s 2% decline.

Price Performance (One Year)

Consistent Customer Growth: At the end of 2018, the company registered a steady increase in customer volume, which was up 2.4% from 2014 end levels. It continues to supply natural gas to a large group of customers. None of its customers in the past three years accounted for 10% or more of gross revenues. This in a way provides stability to the company’s earnings, as the loss of any customer will not substantially affect the top line.

Capital projects: After investing $442 million in 2018, the company plans to invest $450 million in 2019. ONE Gas has a strong long-term capital expenditure plan, with $450-$500 million anticipated to be spent per year over the 2020-2023 time period.

The company is planning to invest $2.4 billion over the next five years to strengthen and expand existing operations. Owing to consistent investment for strengthening operations, the company’s rate base is expected to improve 6-6.7% per year, on an average, between 2018 and 2023.

Upward Estimate Revisions: The Zacks Consensus Estimate for earnings for the current year and 2020 has been revised 0.9% and 0.3% upward, respectively, over the past 60 days.

ONE Gas has an expected long-term earnings growth of 5.8%.

Zacks Rank & Key Picks

Currently, ONE Gas has a Zacks Rank #3 (Hold). Some better-ranked stocks in the utility sector include Alliant Energy Corporation LNT, Chesapeake Utilities Corporation CPK and ONEOK Inc. OKE, each holding a Zacks #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alliant Energy, Chesapeake Utilities and ONEOK’s long-term (three to five years) earnings growth is projected at 5.54%, 7% and 11.51%, respectively.

The Zacks Consensus Estimate for Alliant Energy, Chesapeake Utilities and ONEOK for 2019 has moved up 0.4%, 0.5% and 0.9%, respectively, in the past 60 days.

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