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4 Gas Utility Stocks Positioned to Benefit Amid Industry Headwinds
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Natural gas distribution companies offer services to transport natural gas from the region of production to millions of consumers across the United States. The utilities under the Zacks Utility Gas Distribution industry control miles of underground pipeline network to provide natural gas services to customers. The rising demand for clean-burning natural gas will create more opportunities for natural gas distribution companies.
Atmos Energy Corporation (ATO - Free Report) is well positioned to benefit from rising natural gas demand, supported by its extensive transmission and distribution network, interstate pipelines and ongoing infrastructure investments. Meanwhile, continued capital spending and infrastructure expansion across key production regions are expected to support the growth prospects of Southwest Gas Holdings (SWX - Free Report) , Brookfield Infrastructure (BIPC - Free Report) and ONE Gas (OGS - Free Report) .
About the Industry
The shale boom has greatly expanded natural gas production, while the fuel’s cleaner-burning properties continue to support demand from residential, commercial and industrial customers. Natural gas distribution pipelines are essential for moving gas from interstate and intrastate transmission networks to consumers through localized pipeline systems. The United States possesses approximately 3,353 trillion cubic feet of natural gas reserves and depends on a vast 2.5 million-mile pipeline network to supply customers nationwide. Despite these strengths, the industry continues to face challenges related to aging infrastructure and the rising costs associated with maintaining and upgrading pipeline networks. Increasing adoption of alternative clean energy sources may gradually weaken natural gas demand and pipeline usage over time.
3 Key Trends Reshaping the Gas Distribution Industry
Increasing Competition From Other Clean Sources: Natural gas is encountering increasing competition from alternative clean energy sources. Advances in technology have significantly lowered the cost of developing utility-scale renewable energy projects. At the same time, battery storage systems are helping address the intermittency of renewable power and ensuring a stable, around-the-clock supply of clean energy. As renewable energy becomes more cost-effective and on-site generation reduces dependence on long-distance natural gas pipeline infrastructure, investments in new pipeline projects are facing growing economic challenges.
Aging Infrastructure Creates Challenges in Operations: The U.S. natural gas distribution industry continues to struggle with aging infrastructure, with many old pipelines still in operation, which are nearing the end of their effective service life. Even with ongoing upgrades and system expansion, millions of miles of pipelines still require maintenance, raising concerns about safety, methane leaks and overall system reliability. The leaks in pipelines are resulting in service disruptions, creating safety hazards and leading to higher maintenance costs.
Strong Gas Production & Rising Demand From Data Centers: According to the U.S. Energy Information Administration (“EIA”), U.S. natural gas production is surging to new historical highs. The EIA projects dry gas output to rise from a record 107.7 billion cubic feet per day (Bcf/d) in 2025 to 110.6 Bcf/d in 2026, driven primarily by strong drilling in the Permian and Haynesville regions. Utilities and midstream operators are experiencing growing electricity demand driven by the expansion of AI and digital infrastructure. To meet the reliable baseload power requirements of data centers, utilities are increasingly relying on natural gas generation. The natural gas pipeline operators play a very important role to transport the natural gas to the end users.
Zacks Industry Rank Indicates Weak Near-Term Prospects
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. The Zacks Utility Gas Distribution industry — a 13-stock group within the broader Zacks Utilities sector — currently carries a Zacks Industry Rank #185, which places it in the bottom 24% of the 245 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Since June 2025, earnings estimates for 2026 have moved down 18.5%.
Before we present a few Gas Distribution stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Gas Distribution Industry Lags the S&P 500 and the Sector
The Gas Distribution industry has underperformed the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have gained 10.4% in the said time frame compared with the Utility sector’s growth of 15.8%. The Zacks S&P 500 composite has gained 31.2% in the same time frame.
Price Performance (One Year)
Gas Distribution Industry Trading at a Discount
Since utility companies have a lot of debt on their balance sheets, the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio is commonly used to value them.
The industry is trading at a trailing 12-month EV/EBITDA of 11.32X compared with the Zacks S&P 500 composite’s 18.91X and the sector’s 15.58X.
Over the past five years, the industry has traded at a high of 15.71X and a low of 11.32X, with a median of 11.9X.
Utility Gas Industry vs. S&P 500 (Past Five Years)
Utility Gas Industry vs. Sector (Past Five Years)
4 Natural Gas Utility Stocks With Long-Term Potential
Below are four stocks that have been witnessing positive earnings estimate revisions.
Brookfield Infrastructure Corporation: This New York-based company supplies natural gas and electricity to its customers and frequently enters into agreements to pursue new growth opportunities. It signed a $5 billion deal with Bloom Energy to develop data center power solutions and formed a $20 billion partnership with Qai to support integrated AI facilities.
The current dividend yield is 4.38%. The Zacks Consensus Estimate for BIPC’s 2026 and 2027 earnings per share increased 1.58% and 1.37%, respectively, in the past 60 days. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: BIPC
Atmos Energy: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy plans to invest $4.2 billion in fiscal 2026 to strengthen its infrastructure further and efficiently serve more customers. The company continues to replace old pipelines and provide reliable services to its expanding customer base.
The current dividend yield of 2.37% is better than the Zacks S&P 500 composite’s 1.42%. Long-term (three to five years) earnings growth is currently pegged at 6.82%. The Zacks Consensus Estimate for ATO’s fiscal 2026 and 2027 earnings per share increased 1.58% and 1.37%, respectively, in the past 60 days. The company currently has a Zacks Rank #3 (Hold).
Price and Consensus: ATO
Southwest Gas Corporation: This Las Vegas, NV-based company provides regulated gas distribution and transmission services to its customers. Southwest Gas has plans to invest $6.3 billion in the 2026-2030 period. SWX’s natural gas operations have a diversified and growing customer base in three states, namely Arizona, Nevada and California.
The current dividend yield is 2.99%. The Zacks Consensus Estimate for SWX’s 2026 per share increased 2.15% in the past 60 days. The company currently has a Zacks Rank #3.
Price and Consensus: SWX
ONE Gas Inc.: This Tulsa, OK- based 100% regulated natural gas distribution utility provides natural gas distribution services to more than 2.3 million customers. The company continues to make investments to strengthen its infrastructure and aims to invest $4 billion through 2029, a major portion of which will be directed toward system integrity and replacement projects. ONE Gas will invest $800 million in 2026 to further strengthen its operations.
The current dividend yield is 3.5%. Long-term earnings growth is pegged at 6.23%. The Zacks Consensus Estimate for OGS’ 2026 and 2027 earnings per share reflects year-over-year growth of 5.36% and 6.09%, respectively. The company currently has a Zacks Rank # 3.
Price and Consensus: OGS
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4 Gas Utility Stocks Positioned to Benefit Amid Industry Headwinds
Natural gas distribution companies offer services to transport natural gas from the region of production to millions of consumers across the United States. The utilities under the Zacks Utility Gas Distribution industry control miles of underground pipeline network to provide natural gas services to customers. The rising demand for clean-burning natural gas will create more opportunities for natural gas distribution companies.
Atmos Energy Corporation (ATO - Free Report) is well positioned to benefit from rising natural gas demand, supported by its extensive transmission and distribution network, interstate pipelines and ongoing infrastructure investments. Meanwhile, continued capital spending and infrastructure expansion across key production regions are expected to support the growth prospects of Southwest Gas Holdings (SWX - Free Report) , Brookfield Infrastructure (BIPC - Free Report) and ONE Gas (OGS - Free Report) .
About the Industry
The shale boom has greatly expanded natural gas production, while the fuel’s cleaner-burning properties continue to support demand from residential, commercial and industrial customers. Natural gas distribution pipelines are essential for moving gas from interstate and intrastate transmission networks to consumers through localized pipeline systems. The United States possesses approximately 3,353 trillion cubic feet of natural gas reserves and depends on a vast 2.5 million-mile pipeline network to supply customers nationwide. Despite these strengths, the industry continues to face challenges related to aging infrastructure and the rising costs associated with maintaining and upgrading pipeline networks. Increasing adoption of alternative clean energy sources may gradually weaken natural gas demand and pipeline usage over time.
3 Key Trends Reshaping the Gas Distribution Industry
Increasing Competition From Other Clean Sources: Natural gas is encountering increasing competition from alternative clean energy sources. Advances in technology have significantly lowered the cost of developing utility-scale renewable energy projects. At the same time, battery storage systems are helping address the intermittency of renewable power and ensuring a stable, around-the-clock supply of clean energy. As renewable energy becomes more cost-effective and on-site generation reduces dependence on long-distance natural gas pipeline infrastructure, investments in new pipeline projects are facing growing economic challenges.
Aging Infrastructure Creates Challenges in Operations: The U.S. natural gas distribution industry continues to struggle with aging infrastructure, with many old pipelines still in operation, which are nearing the end of their effective service life. Even with ongoing upgrades and system expansion, millions of miles of pipelines still require maintenance, raising concerns about safety, methane leaks and overall system reliability. The leaks in pipelines are resulting in service disruptions, creating safety hazards and leading to higher maintenance costs.
Strong Gas Production & Rising Demand From Data Centers: According to the U.S. Energy Information Administration (“EIA”), U.S. natural gas production is surging to new historical highs. The EIA projects dry gas output to rise from a record 107.7 billion cubic feet per day (Bcf/d) in 2025 to 110.6 Bcf/d in 2026, driven primarily by strong drilling in the Permian and Haynesville regions. Utilities and midstream operators are experiencing growing electricity demand driven by the expansion of AI and digital infrastructure. To meet the reliable baseload power requirements of data centers, utilities are increasingly relying on natural gas generation. The natural gas pipeline operators play a very important role to transport the natural gas to the end users.
Zacks Industry Rank Indicates Weak Near-Term Prospects
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. The Zacks Utility Gas Distribution industry — a 13-stock group within the broader Zacks Utilities sector — currently carries a Zacks Industry Rank #185, which places it in the bottom 24% of the 245 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Since June 2025, earnings estimates for 2026 have moved down 18.5%.
Before we present a few Gas Distribution stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Gas Distribution Industry Lags the S&P 500 and the Sector
The Gas Distribution industry has underperformed the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have gained 10.4% in the said time frame compared with the Utility sector’s growth of 15.8%. The Zacks S&P 500 composite has gained 31.2% in the same time frame.
Price Performance (One Year)
Gas Distribution Industry Trading at a Discount
Since utility companies have a lot of debt on their balance sheets, the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio is commonly used to value them.
The industry is trading at a trailing 12-month EV/EBITDA of 11.32X compared with the Zacks S&P 500 composite’s 18.91X and the sector’s 15.58X.
Over the past five years, the industry has traded at a high of 15.71X and a low of 11.32X, with a median of 11.9X.
Utility Gas Industry vs. S&P 500 (Past Five Years)
Utility Gas Industry vs. Sector (Past Five Years)
4 Natural Gas Utility Stocks With Long-Term Potential
Below are four stocks that have been witnessing positive earnings estimate revisions.
Brookfield Infrastructure Corporation: This New York-based company supplies natural gas and electricity to its customers and frequently enters into agreements to pursue new growth opportunities. It signed a $5 billion deal with Bloom Energy to develop data center power solutions and formed a $20 billion partnership with Qai to support integrated AI facilities.
The current dividend yield is 4.38%. The Zacks Consensus Estimate for BIPC’s 2026 and 2027 earnings per share increased 1.58% and 1.37%, respectively, in the past 60 days. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: BIPC
Atmos Energy: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy plans to invest $4.2 billion in fiscal 2026 to strengthen its infrastructure further and efficiently serve more customers. The company continues to replace old pipelines and provide reliable services to its expanding customer base.
The current dividend yield of 2.37% is better than the Zacks S&P 500 composite’s 1.42%. Long-term (three to five years) earnings growth is currently pegged at 6.82%. The Zacks Consensus Estimate for ATO’s fiscal 2026 and 2027 earnings per share increased 1.58% and 1.37%, respectively, in the past 60 days. The company currently has a Zacks Rank #3 (Hold).
Price and Consensus: ATO
The current dividend yield is 2.99%. The Zacks Consensus Estimate for SWX’s 2026 per share increased 2.15% in the past 60 days. The company currently has a Zacks Rank #3.
Price and Consensus: SWX
ONE Gas Inc.: This Tulsa, OK- based 100% regulated natural gas distribution utility provides natural gas distribution services to more than 2.3 million customers. The company continues to make investments to strengthen its infrastructure and aims to invest $4 billion through 2029, a major portion of which will be directed toward system integrity and replacement projects. ONE Gas will invest $800 million in 2026 to further strengthen its operations.
The current dividend yield is 3.5%. Long-term earnings growth is pegged at 6.23%. The Zacks Consensus Estimate for OGS’ 2026 and 2027 earnings per share reflects year-over-year growth of 5.36% and 6.09%, respectively. The company currently has a Zacks Rank # 3.
Price and Consensus: OGS