Revenue Miss: ONE Gas, Inc. Fell 7.6% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models
Last week, you might have seen that ONE Gas, Inc. (NYSE:OGS) released its yearly result to the market. The early response was not positive, with shares down 2.3% to US$59.34 in the past week. Results look mixed - while revenue fell marginally short of analyst estimates at US$2.4b, statutory earnings were in line with expectations, at US$4.14 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for ONE Gas
Taking into account the latest results, the consensus forecast from ONE Gas' six analysts is for revenues of US$2.47b in 2024. This reflects a reasonable 4.0% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to decrease 5.4% to US$3.87 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.67b and earnings per share (EPS) of US$3.87 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The consensus has reconfirmed its price target of US$60.83, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on ONE Gas' market value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on ONE Gas, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$57.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that ONE Gas' revenue growth is expected to slow, with the forecast 4.0% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.8% annually. Factoring in the forecast slowdown in growth, it seems obvious that ONE Gas is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$60.83, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for ONE Gas going out to 2026, and you can see them free on our platform here.
Even so, be aware that ONE Gas is showing 2 warning signs in our investment analysis , you should know about...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
