ONE Gas (OGS) to Benefit From Investments & Regulated Operations
ONE Gas, Inc.’s OGS ongoing capital expenditures for pipeline integrity and extension of services to new areas are likely to further improve its performance. The company is expected to benefit from 100% regulated operations and a high percentage of residential customers.
However, this Zacks Rank #3 (Hold) company has to face risks related to the seasonality of its business and competition from other clean energy sources.
Tailwinds
The company's long-term investment plans will further strengthen its operations. It expects capital expenditures, including asset removal costs, to be approximately $725 million in 2023. Nearly 70% of the planned capital expenditure will be directed toward system integrity and replacement projects.
Systematic expenditure and rate approval from the commission will enable it to continue with infrastructure-strengthening initiatives. On Mar 10, 2023, the company filed the Gas Reliability Infrastructure Program (GRIP) for the consolidated West-North region in Texas, seeking $7.4 million to recover the costs associated with capital investments of $54 million, which became effective in July 2023.
This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. More than 93% of OGS’ customers belong to the residential category.
Headwinds
The natural gas industry is highly competitive, and ONE Gas has to compete against its peers to retain customers and prove the reliability of its services.
The sale of natural gas to residential and commercial customers is a seasonal business, as a substantial portion of their natural gas requirements are for heating. Also, a warmer-than-expected winter would have an adverse impact on the company’s profitability.
Stocks to Consider
Some better-ranked stocks from the same sector are NewJersey Resources NJR, sporting a Zacks Rank #1 (Strong Buy), and Sempra Energy SRE and NiSource Inc. NI, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
NJR’s long-term (three to five years) earnings growth rate is 6%. The Zacks Consensus Estimate for NJR’s fiscal 2023 EPS implies a year-over-year improvement of 7.6%.
Sempra Energy’s long-term earnings growth rate is 4.95%. It delivered an average earnings surprise of 9% in the last four quarters.
NiSource’s long-term earnings growth rate is 7.15%. The Zacks Consensus Estimate for NI’s 2023 EPS indicates year-over-year growth of 8.2%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NiSource, Inc (NI) : Free Stock Analysis Report
Sempra Energy (SRE) : Free Stock Analysis Report
NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
ONE Gas, Inc. (OGS) : Free Stock Analysis Report
