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ONE Gas (OGS) Ups 2020 EPS View, To Invest $3B in Five Years

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ONE Gas, Inc. OGS updated its 2020 financial guidance as well as issued the 2021 outlook. The company expects its 2021 net income in the range of $198-$210 million and earnings per share (EPS) in $3.68-$3.92. The Zacks Consensus Estimate of EPS is pegged at $3.83, above the utility’s midpoint of $3.80.

This expectation reflects the benefit of new rates and customer growth, partly offset by elevated operating expenses including depreciation expense from capital investments. It is based on the assumption of normal weather but does not assume that the company will record any regulatory assets for COVID-19 during 2021. Also, it raised its 2020 earnings guidance to $3.66-$3.70 per share from $3.44-$3.68. The Zacks Consensus Estimate for EPS is pegged at $3.61, below the utility’s midpoint of $3.68.

Capital expenditures including asset removal costs are expected to be nearly $540 million in 2021. Of this figure, nearly 70% will be aimed at system integrity while the balance majorly reserved for customer growth. The expected 2021 average rate base is $4.23 billion, in line with the utility ratemaking in each jurisdiction.

Long-Term Outlook

Between 2020 and 2025, the annual dividend is expected to grow at a rate of 6-8% on average. Also, the targeted dividend payout ratio is expected to be 55-65% of the company’s net income, subject to its board of directors' approval. In the same time frame, net income and earnings per share are expected to annually increase 6-8% and 5-7%, respectively, on average. However, the nature and timing of the regulatory filings like full-rate cases as well as equity issuances will impact the growth rate every year.

Capital expenditures including asset removal costs are expected to be $3 billion for the 2021-2025 time period or in the range of $540-$640 million per year. This will lead to rate base growth of 7-8% annually, on average.

Zacks Rank & Price Performance

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of this utility have lost 24.9% in the past year compared with the industry’s decline of 27.5%.

Stocks to Consider

A few better-ranked stocks from the same space are ONEOK, Inc. OKE, Centrica PLC CPYYY and MDU Resources Group, Inc. MDU. While ONEOK flaunts a Zacks Rank#1, others carry a Zacks Rank#2 (Buy) at present.

The Zacks Consensus Estimate for ONEOK’s 2021 earnings has moved 9.4% north in the past 60 days. The company has a long-term (three-five years) earnings growth rate of 4.62%.

Centrica PLC has a long-term earnings growth rate of 6.83%. The Zacks Consensus Estimate for 2021 earnings has moved 4.8% north in the past 60 days.

The Zacks Consensus Estimate for MDU Resources’ 2021 earnings has moved 2.6% north in the past 60 days. The company has a long-term earnings growth rate of 5%.

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ONEOK, Inc. (OKE) : Free Stock Analysis Report
 
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ONE Gas, Inc. (OGS) : Free Stock Analysis Report
 
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