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ONE Gas (OGS) to Gain From Regulated Operations & Investments
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ONE Gas, Inc.’s (OGS - Free Report) strategic capital expenditures for pipeline integrity and extension of services to new areas should further boost its overall performance. 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.
Tailwinds
ONE Gas expects capital expenditures, including asset removal costs, to be nearly $750 million in 2024. It expects capital expenditures to be $4.25 billion through 2028. Nearly $3 billion of the planned capital expenditure is set to be directed toward system integrity and replacement projects.
This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. More than 93% of OGS’ customers belong to the residential category. It was able to register higher customer additions and is expected to continue with the same in 2024, courtesy of improving economic conditions in its service territories.
The company has been steadily increasing its customer base every year since 2015 and expects an average annual customer growth of 0.9% for 2024-2028 across its service territories. In the first quarter of 2024, ONE Gas added nearly 5,200 new customer connections.
Headwinds
Natural gas sales to residential and commercial customers are seasonal, as a substantial portion of the gas is used for heating. Accordingly, if its service territories experience a warmer-than-expected winter, it would adversely impact the demand and profitability of the company.
The natural gas industry is highly competitive and the company has to compete against a large number of contenders to retain customers and prove the reliability of its services.
Price Performance
In the past three months, shares of the company have risen 2% compared with the industry’s 6% growth.
ATO’s long-term (three to five years) earnings growth rate is 7%. The Zacks Consensus Estimate for ATO’s fiscal 2024 EPS implies a year-over-year improvement of 9.2%.
MDU’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for MDU’s 2024 EPS implies a year-over-year increase of 3.3%.
The Zacks Consensus Estimate for UGI’s fiscal 2024 EPS indicates year-over-year growth of 2.8%. The company delivered an average earnings surprise of 19.1% in the last four quarters.
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ONE Gas (OGS) to Gain From Regulated Operations & Investments
ONE Gas, Inc.’s (OGS - Free Report) strategic capital expenditures for pipeline integrity and extension of services to new areas should further boost its overall performance. 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.
Tailwinds
ONE Gas expects capital expenditures, including asset removal costs, to be nearly $750 million in 2024. It expects capital expenditures to be $4.25 billion through 2028. Nearly $3 billion of the planned capital expenditure is set to be directed toward system integrity and replacement projects.
This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. More than 93% of OGS’ customers belong to the residential category. It was able to register higher customer additions and is expected to continue with the same in 2024, courtesy of improving economic conditions in its service territories.
The company has been steadily increasing its customer base every year since 2015 and expects an average annual customer growth of 0.9% for 2024-2028 across its service territories. In the first quarter of 2024, ONE Gas added nearly 5,200 new customer connections.
Headwinds
Natural gas sales to residential and commercial customers are seasonal, as a substantial portion of the gas is used for heating. Accordingly, if its service territories experience a warmer-than-expected winter, it would adversely impact the demand and profitability of the company.
The natural gas industry is highly competitive and the company has to compete against a large number of contenders to retain customers and prove the reliability of its services.
Price Performance
In the past three months, shares of the company have risen 2% compared with the industry’s 6% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Atmos Energy (ATO - Free Report) , MDU Resources Group (MDU - Free Report) and UGI Corporation (UGI - Free Report) , 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%. The Zacks Consensus Estimate for ATO’s fiscal 2024 EPS implies a year-over-year improvement of 9.2%.
MDU’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for MDU’s 2024 EPS implies a year-over-year increase of 3.3%.
The Zacks Consensus Estimate for UGI’s fiscal 2024 EPS indicates year-over-year growth of 2.8%. The company delivered an average earnings surprise of 19.1% in the last four quarters.