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Why Is ONE Gas (OGS) Up 7.2% Since Last Earnings Report?

Zacks Equity Research
·3 min read

A month has gone by since the last earnings report for ONE Gas (OGS). Shares have added about 7.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ONE Gas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

ONE Gas’ Earnings Beat Estimates in Q3, Increase Y/Y

ONE Gas Inc.  reported third-quarter 2020 earnings of 39 cents per share, beating the Zacks Consensus Estimate of 36 cents by 8.3%.

The bottom line also improved 18.2% from the year-ago earnings, primarily owing to new rates in Kansas and Oklahoma, and residential customer growth.

Total Revenues

The company recorded revenues of $244.6 million in the third quarter, which missed the Zacks Consensus Estimate of $267.3 million by 8.5%. The top line also declined 1.6% from the year-ago level.

Quarterly Highlights

Natural gas sales volume delivered in the reported quarter was 12.1 billion cubic feet (Bcf), up 0.8% year over year, primarily on higher residential customer usage. Total volumes delivered in the same period were 61.7 Bcf, up 3% from the year-ago period.

Total operating expenses in the reported quarter increased 2.1% from the year-ago figure to $163.5 million.

Operating income in the reported quarter improved 4.9% year over year to $40.7 million.

In the third quarter of 2020, the company’s customer base rose 1.4% from the year-ago time frame, which aided its both top and the bottom line.

The company incurred net interest expenses of $15.5 million, down 1.5% from the prior-year figure.

Financial Highlights

As of Sep 30, 2020, ONE Gas had cash and cash equivalents of $6.2 million compared with $17.9 million at the end of 2019.

Long-term debt (excluding current maturities) was $1,582.2 million as of Sep 30, 2020, compared with $1,286.1 million as of Dec 31, 2019.

Cash provided by operating activities in first nine months of 2020 was $325.3 million compared with $288.5 million in the year-ago period.

Guidance

ONE Gas expects its 2020 net income to be near the upper end of the guidance range of $186-$198 million. Its annual earnings per share outlook is projected in the $3.44-$3.68 band. The midpoint of the EPS guidance is $3.56, marginally lower than the current Zacks Consensus Estimate of $3.57 for the period.

Capital expenditure still expected to be in the range of $500 million to $525 million for 2020.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, ONE Gas has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ONE Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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