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ONE Gas Updates Investors with Near & Long-Term Guidance

Zacks Equity Research

ONE Gas, Inc. OGS revised 2017 guidance upwards and issued 2018 financial guidance. Further, the company has also made an announcement regarding its five-year growth forecast.

2017 Guidance Update

The natural gas service provider has increased 2017 net income guidance in the range of $3.06-$3.10 per diluted share, from its previous guidance of $2.94-$3.04.

2018 Highlights

ONE Gas expects 2018 net income to be in the range of $156-$168 million, or $2.96-$3.20 per diluted share. The 2018 earnings guidance reflects benefits from new rates and normal weather conditions in the company’s service territories. Further, it reflects 4 cents per diluted share contribution from the share-based compensation accounting standard, adopted in the first quarter of 2017.

The company anticipates achieving a 7.35% return on equity in 2018, which assumes an average rate base of $3.4 billion. The company envisions capital expenditures to be $375 million in 2018.

5-Year Guidance Update

ONE Gas expects net income and earnings per share to increase by an average 5-7% annually between 2017 and 2022. The company’s rate base is expected to grow an average of 6.0-6.5% per year between 2017 and 2022.

The company anticipates capital expenditures to be in the range of $375-$415 million per year between 2018 and 2022, up from the previous five-year capital expenditures guidance range of $350-$380 million per year between 2017 and 2021.

ONE Gas, a 100% regulated natural gas utility, is expected to benefit from capital investments to strengthen infrastructure. It anticipates to recoup expenses through rate hikes.

Dividend Growth Guidance

ONE Gas’ board of directors raised quarterly dividend by 4 cents per share to 46 cents per share, effective for the first quarter 2018. This will result in an annualized dividend of $1.84 per share, reflecting an annual increase of 9.5%.

Over the long term, it expects average annual dividend growth rate to be 7-9% between 2017 and 2022, with a target dividend payout ratio of 55-65% of net income, subject to approval of board of directors.

Price Movement

In the last one year, shares of ONE Gas have gained 9.8%, compared with the industry’s rally of 5.9%. Such outperformance can be attributed to the company’s robust performance over the four quarters as evidenced by its average positive surprise of 7.47%.

 

Zacks Rank

ONE Gas currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the sector include Pampa Energia S.A. PAM, Algonquin Power & Utilities Corp. AQN and CenterPoint Energy, Inc. CNP. While Pampa Energia sports a Zacks Rank #1 (Strong buy), Algonquin Power and CenterPoint Energy, carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pampa Energia delivered positive average earnings surprise of 585.71% in the last four quarters. Its 2018 earnings growth estimate is pegged at 61.30% year over year.

Algonquin Power delivered an average surprise of 33.17% in the trailing four quarters. Its 2018 earnings growth estimate is pegged at 6.79% year over year.

CenterPoint Energy delivered positive average earnings surprise of 6.42% in the last four quarters. Its 2018 earnings growth estimate is pegged at 9.16% year over year.

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