4 Reasons to Add ONE Gas (OGS) to Your Portfolio Right Now
ONE Gas (OGS) offers a nice investment opportunity in the utility space on rising earnings estimates, investments to strengthen its infrastructure & i...
ONE Gas Inc. OGS is poised to benefit from the expanding customer base, new gas rates and steady capital deployment for upgrading its infrastructure.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2021 earnings per share and revenues is pegged at $3.81 and $1.68 billion, respectively. The bottom- and top-line estimates suggest an increase of 3.5% and 10.1%, respectively, from the year-ago level.
The Zacks Consensus Estimate for 2022 earnings and revenues is pegged at $4.07 per share and $1.74 billion, respectively. The bottom- and top-line estimates suggest a 6.9% and 3.4% increase, respectively, from the year-ago level.
Consistent Investments on Infrastructure
Distribution pipelines play a very critical role in safely supplying natural gas to customers. The company now aims to invest nearly $3 billion over the 2021-2025 time period. Nearly 65-70% of the planned capital expenditure will be directed toward systems integrity and replacement projects. It continues to make progress in the Vintage Pipeline Replacement Program. One Gas has been replacing vintage pipelines at a rate of 234 miles per year over the past five years. This replacement program will continue for the next couple of decades to complete the upgrade of all vintage lines.
The ongoing capital expenditures are directed toward pipeline integrity, extension of services to new areas, increase in system capacity, pipeline replacements, automated meter reading, government-mandated pipeline relocations, facilities, information technology assets and cybersecurity.
Long-Term Earnings Growth & Dividend Yield
ONE Gas’ trailing four-quarter earnings surprise is 6.5%, on average. The company’s long-term (three to five years) earnings growth is currently projected at 5%.
Currently, it has a dividend yield of 3.23% compared with the industry’s average yield of 3%.
Expanding Customer Base
ONE Gas is a regulated natural gas distribution utility having a high percentage of residential customers, which provide stability and strong earnings visibility. The company is steadily increasing the customer base every year from a 2015 base and a similar trend has been observed in first-half 2021. The majority of the total customer base comprises residential customers.
New rates effective in Oklahoma, Kansas and Texas are expected to come into effect in second-half 2021, which will boost One Gas’ annual revenues. Systematic expenditure and rate approval from the commission will enable it to continue with infrastructure strengthening initiatives.
In the past five years, the stock has gained 17.1% compared with the industry’s growth of 7.9%.
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Other Stocks to Consider
Other top-ranked stocks in the same sector include Otter Tail Corporation OTTR, California Water Service Group CWT and Middlesex Water Company MSEX. Otter Tail currently sports Zacks Rank of 1 and other two stocks hold a Zacks Rank #2.
Otter Tail, California Water Service Group and Middlesex Water Company delivered an average earnings surprise of 31.8%, 15.4% and 0.5%, respectively.
The Zacks Consensus Estimate for 2021 earnings for Otter Tail, California Water Service Group and Middlesex Water Company has moved up 39.2%, 2.9% and 3.7%, respectively, in the past 60 days.
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ONE Gas, Inc. (OGS): Free Stock Analysis Report
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