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ATO or OGS: Which Utility Gas Distribution Stock to Accumulate?
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Natural gas pipeline operators play a crucial role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter distribution pipelines. The natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the United States and internationally is driving the demand for distribution pipelines.
Awareness about lower emissions, as well as a higher volume of exports, has boosted domestic natural gas production in the United States. Rising demand for natural gas from different customer groups will create demand for the addition of distribution pipelines.
Major concerns for the industry are aging infrastructure and increasing investment costs required to upgrade and maintain the vast network of pipelines due to the hike in interest rates. The expected decline in natural gas consumption in first-quarter 2023 due to very mild temperatures may impact distributors.
In this article, we run a comparative analysis on two Zacks Utility - Gas Distribution companies — Atmos Energy (ATO - Free Report) and ONE Gas Inc. (OGS - Free Report) — to decide which stock is worth retaining in your portfolio now.
Atmos Energy has a market capitalization of $16.3 billion and the same for ONE Gas is $4.41 billion.
Growth Projections
The Zacks Consensus Estimate for Atmos Energy’s fiscal 2023 earnings is pegged at $6 on revenues of $5.17 billion. This indicates 7.14% growth in the bottom line and 23.1% increase in the top line from the year-ago reported figures.
The Zacks Consensus Estimate for ONE Gas’ 2023 earnings is pegged at $4.13 on revenues of $2.34 billion. This suggests 1.23% growth in the bottom line and a 9.1% decrease in the top line from the year-ago reported figures.
Price Performance
In the past six months, Atmos Energy’s shares have gained 11.8% compared with the industry's growth of 4.3%. Shares of ONE Gas have risen 8.7%.
Image Source: Zacks Investment Research
Debt-to-Capital
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Atmos Energy and ONE Gas have a debt-to-capital of 39.98% and 50.74%, respectively, compared with the industry’s 50.74%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Atmos Energy is 2.62%, whereas ONE Gas’ dividend yield is 3.27%. Both companies’ dividend yields are better than the Zacks S&P 500 Composite’s average yield of 1.73%.
Current Ratio
The current ratio measures a company's ability to pay short-term obligations or those due within a year. At present, the current ratio of Atmos Energy is 1.03 and ONE Gas’ is 1.02. Both having a ratio greater than 1 indicates that both have ample liquidity to meet near-term obligations.
Outcome
Even though both companies are efficiently providing services to customers and should be included in one’s portfolio, the above comparisons put Atmos Energy ahead of ONE Gas.
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ATO or OGS: Which Utility Gas Distribution Stock to Accumulate?
Natural gas pipeline operators play a crucial role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter distribution pipelines. The natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the United States and internationally is driving the demand for distribution pipelines.
Awareness about lower emissions, as well as a higher volume of exports, has boosted domestic natural gas production in the United States. Rising demand for natural gas from different customer groups will create demand for the addition of distribution pipelines.
Major concerns for the industry are aging infrastructure and increasing investment costs required to upgrade and maintain the vast network of pipelines due to the hike in interest rates. The expected decline in natural gas consumption in first-quarter 2023 due to very mild temperatures may impact distributors.
In this article, we run a comparative analysis on two Zacks Utility - Gas Distribution companies — Atmos Energy (ATO - Free Report) and ONE Gas Inc. (OGS - Free Report) — to decide which stock is worth retaining in your portfolio now.
Both companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atmos Energy has a market capitalization of $16.3 billion and the same for ONE Gas is $4.41 billion.
Growth Projections
The Zacks Consensus Estimate for Atmos Energy’s fiscal 2023 earnings is pegged at $6 on revenues of $5.17 billion. This indicates 7.14% growth in the bottom line and 23.1% increase in the top line from the year-ago reported figures.
The Zacks Consensus Estimate for ONE Gas’ 2023 earnings is pegged at $4.13 on revenues of $2.34 billion. This suggests 1.23% growth in the bottom line and a 9.1% decrease in the top line from the year-ago reported figures.
Price Performance
In the past six months, Atmos Energy’s shares have gained 11.8% compared with the industry's growth of 4.3%. Shares of ONE Gas have risen 8.7%.
Image Source: Zacks Investment Research
Debt-to-Capital
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Atmos Energy and ONE Gas have a debt-to-capital of 39.98% and 50.74%, respectively, compared with the industry’s 50.74%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Atmos Energy is 2.62%, whereas ONE Gas’ dividend yield is 3.27%. Both companies’ dividend yields are better than the Zacks S&P 500 Composite’s average yield of 1.73%.
Current Ratio
The current ratio measures a company's ability to pay short-term obligations or those due within a year. At present, the current ratio of Atmos Energy is 1.03 and ONE Gas’ is 1.02. Both having a ratio greater than 1 indicates that both have ample liquidity to meet near-term obligations.
Outcome
Even though both companies are efficiently providing services to customers and should be included in one’s portfolio, the above comparisons put Atmos Energy ahead of ONE Gas.