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Reasons to Add ONE Gas (OGS) to Your Portfolio Right Now

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ONE Gas Inc. (OGS - Free Report) is poised for growth on the back of regulated earnings, steady demand from residential customers, new rates and systematic capital expenditure to strengthen operations.

This regulated natural gas distribution company continues to replace vintage pipelines to provide quality services to the expanding customer base. In addition, close proximity to significant natural gas reserves and transportation infrastructure are added advantages for the company compared with its peers.

Consistent Addition: At the end of 2018, the company registered a steady increase in customer volume, which was up 2.4% from 2014 end levels. It continues to supply natural gas to a large group of customers. None of its customers in the past three years accounted for 10% or more of gross revenues. This in a way provides stability to the company’s earnings, as the loss of any customer will not substantially affect the top line.

Capital Projects: After investing $442 million in 2018, the company plans to invest $450 million in 2019. ONE Gas has a strong long-term capital expenditure plan, with $450-$500 million anticipated to be spent per year over the 2020-2023 time period.

The company is planning to invest $2.4 billion over the next five years to strengthen and expand existing operations. Owing to consistent investment for strengthening operations, the company’s rate base is expected to improve 6-6.7% per year, on average, between 2018 and 2023.

Growth Projections: The Zacks Consensus Estimate for 2019 earnings per share is pegged at $3.51 on $1.67 billion revenues. The bottom and top lines indicate 8% and 2.22% year-over-year increase, respectively.

The consensus mark for 2020 earnings is pegged at $3.63 per share on revenues of $1.73 billion. While the bottom line translates to a 3.84% increase, the top line also suggests a 3.84% improvement on a year-over-year basis.

Its long-term (three to five years) earnings growth is currently projected at 6.13%.

Impressive Price Performance: Shares of ONE Gas have gained 13.9% in the past 12 months versus the industry and Zacks S&P 500 composite’s 9.2% and 5.8% growth, respectively.

Price  Performance (One year)



 

Upward Estimate Revisions & Surprise History : The Zacks Consensus Estimate for earnings for the current year and 2020 has been revised 1.7% and 0.8% upward, respectively, over the past 90 days.

The company delivered average positive earnings surprise of 5.87% in the last four quarters.

Zacks Rank & Other Key Picks

Currently, ONE Gas has a Zacks Rank #2 (Buy). Other top-ranked stocks in the utility sector include MDU Resources Group (MDU - Free Report) , American Electric Power Company (AEP - Free Report) and WEC Energy Group (WEC - Free Report) . MDU Resources sports a Zacks #1 (Strong Buy), while the other two stocks carry a Zacks #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

MDU Resources, American Electric Power and WEC Energy Group’s long-term earnings growth is projected at 7.1%, 5.66% and 6.16%, respectively.

The Zacks Consensus Estimate for MDU Resources, American Electric Power and WEC Energy Group for 2019 has moved up 0.7%, 0.3% and 0.3%, respectively, in the past 60 days.

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