ONE Gas to Benefit From Regulated Operations & Strategic Investments

ONE Gas, Inc. OGS continues to benefit from its strategic capital expenditures for pipeline integrity and extension of services to new areas. The company is expected to benefit from 100% regulated operations and a high percentage of residential customers. 

However, this Zacks Rank #3 (Hold) company has to face risks related to the seasonality of its business and strong competition from other clean energy sources.

Factors Acting in Favor of OGS

ONE Gas invested $703.2 million in 2024 and expects capital expenditures, including asset removal costs, of $750 million in 2025. 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.

New rates implemented in Oklahoma, Kansas and Texas should further boost annual revenues. Pending rate cases, once approved, will further boost its top line. In addition, ONE Gas’ supply assets are in close proximity to gas reserves. This results in lower transportation, storage and commodity costs, while providing it with a competitive advantage. The company continues to provide high-quality services to customers.

This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. More than 92% of the customers served by the company are from the residential category. It was able to register higher customer additions and is expected to continue to do so over the long term, courtesy of improving economic conditions in its service territories.

Challenges Faced by OGS

Natural gas sales to residential and commercial customers are seasonal, as a substantial portion of their natural gas requirements is for heating. Accordingly, the demand for natural gas is higher during the months of November through March than in the other months of the year. If winter weather is warmer, it would have an adverse impact on the demand and profitability of the company.

The natural gas industry is highly competitive and OGS has to compete against a large number of competitors to retain customers and prove the reliability of its services.

OGS Stock’s Price Performance

In the past six months, shares of the company have risen 3.5% against the industry’s 2.1% decline.

Stocks to Consider

Some better-ranked stocks from the same industry are Atmos Energy ATO, MDU Resources Group MDU and UGI Corporation UGI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ATO’s long-term (three to five years) earnings growth rate is 7.19%. The Zacks Consensus Estimate for ATO’s fiscal 2025 earnings per share (EPS) implies a year-over-year improvement of 6%.

MDU’s long-term earnings growth rate is 6.46%. The Zacks Consensus Estimate for MDU’s 2025 EPS implies a year-over-year increase of 5.6%.

UGI’s long-term earnings growth rate is 5.2%. The Zacks Consensus Estimate for UGI’s fiscal 2025 EPS indicates year-over-year growth of 1.6%. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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