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ONE Gas (OGS) Up 1.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for ONE Gas (OGS - Free Report) . Shares have added about 1.7% 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 catalysts.

ONE Gas Q2 Earnings Surpass Estimates, 2018 View Up

ONE Gas, Inc.  posted second-quarter 2018 operating earnings of 39 cents per share, beating the Zacks Consensus Estimate of 32 cents by 21.9%. Earnings in the second quarter were positive impacted by colder-than-normal weather and new rates in its service territories.

Total Revenues

Total revenues of $292.5 million surpassed the Zacks Consensus Estimate of $275 million by 6.4%. Total revenues improved 4.6% from $279.9 million in the prior-year quarter.

Quarterly Highlights

Total operating expenses in the reported quarter increased 5.8% to $157.3 million from the year-ago quarter, due to increase in operating and maintenance expenses, and general taxes.

In the second quarter, the company served 12,000 more customers than the comparable year-ago period, primarily due to an increase in the residential customer base.

Operating income in the reported quarter was down 15.1% year over year to $41.1 million.

The company incurred interest expenses of $12.0 million, up 6.2% from the year-ago period.

Financial Highlights

On Jun 30, 2018, ONE Gas had cash and cash equivalents of $12.58 million compared with $14.4 million as of Dec 31, 2017.

Long-term debt (excluding current maturities) was $893.7 million as of Jun 30, 2018, down from the Dec 31, 2017 level of $1,193.3 million.

The company’s cash flow from operating activities in the first half of 2018 was $399.9 million, up from $279.3 million recorded in the first half of 2017.

Guidance

ONE Gas now expects its 2018 net income in the range of $167-178 million (versus earlier guided range of $156-$168 million) and earnings per share within $3.15-$3.35 (prior expectation was $2.96-$3.20). The upward revision in guidance takes into consideration the positive impact of colder-than-normal weather and higher transport volumes.

ONE Gas now expects its 2018 capital expenditure in the range of $375-$390 million (versus earlier projection of $370 million), with 70% of it directed toward the system integrity and replacement projects.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 5.88% due to these changes.

VGM Scores

Currently, ONE Gas has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, 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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