It has been about a month since the last earnings report for ONE Gas (OGS - Free Report) . Shares have added about 3.1% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
ONE Gas Q3 Earnings Surpass Estimates, Revenues Miss
ONE Gas, Inc. posted third-quarter 2018 operating earnings of 31 cents per share, beating the Zacks Consensus Estimate of 28 cents by 10.7%.
However, earnings in the third quarter were lower than the year-ago level by 13.9%. Total natural gas sales volumes delivered were 11.6 Bcf in third-quarter 2018, down 2% from the same period last year, adversely impacting year-over-year earnings.
Total revenues of $238.3 million lagged the Zacks Consensus Estimate of $251 million by 5.1%. Also, the figure declined 3.6% from $247.1 million in the prior-year quarter.
Total operating expenses in the reported quarter increased 5.2% to $150.8 million from the year-ago quarter, due to increase in operating and maintenance expenses.
In the third quarter, the company served 9,000 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 19.8% year over year to $36.2 million.
The company incurred interest expenses of $12.4 million, up 7.6% from the year-ago period.
On Sep 30, 2018, ONE Gas had cash and cash equivalents of $12.43 million compared with $14.4 million as of Dec 31, 2017.
Long-term debt (excluding current maturities) was $893.9 million as of Sep 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 nine months of 2018 was $436.8 million, up from $302.4 million recorded in the corresponding period of 2017.
ONE Gas now expects its 2018 net income in the range of $167-$178 million and earnings per share within $3.15-$3.35. The guidance takes into consideration the positive impact of colder-than-normal weather and higher transport volumes.
The company now expects its 2018 capital expenditure in the range of $375-$390 million, with 70% of it directed toward system integrity and replacement projects.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, ONE Gas has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, ONE Gas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.