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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