Technology

ONE Gas (OGS) Down 3.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for ONE Gas (OGS). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ONE Gas due for a breakout? 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 catalysts.

ONE Gas Q2 Earnings Beat Estimates, Increase Y/Y

ONE Gas Inc. reported second-quarter 2020 earnings of 48 cents per share, beating the Zacks Consensus Estimate of 45 cents by 6.7%.

The bottom line also improved 4.3% from the year-ago earnings, primarily owing to new rates in Kansas and Texas and residential customer growth, which in turn, spurred demand for natural gas.

Total Revenues

The company recorded total revenues of $273.3 million in the second quarter, which missed the Zacks Consensus Estimate of $296 million by 7.7%. Revenues also declined 5.9% from the year-ago level.

Quarterly Highlights

Natural gas sales volume delivered in the reported quarter was 20.7 billion cubic feet (Bcf), up 9.5% year over year, primarily on higher residential customer usage. Total volumes delivered in the same period were 71.6 Bcf, up 1.9% from the year-ago period.

Total operating expenses in the reported quarter inched up 3.2% from the year-ago figure to $166.2 million.

Operating income in the reported quarter dipped 4.9% year over year to $44.6 million.

In the second quarter of 2020, the company’s customer base rose 1.1% from the year-ago time frame, which aided its top and the bottom line.

The company incurred net interest expenses of $15.8 million, up 2.9% from the prior-year figure.

Financial Highlights

As of Jun 30, 2020, ONE Gas had cash and cash equivalents of $10.5 million compared with $17.9 million at the end of 2019.

Long-term debt (excluding current maturities) was $1,581.9 million as of Jun 30, 2020, compared with $1,286.1 million as of Dec 31, 2019.

Cash provided by operating activities in first-half 2020 was $278.7 million compared with $241.2 million in the year-ago period.

Guidance

ONE Gas reiterated its 2020 guidance for net income in the range of $186-$198 million. Its earnings per share outlook are projected in the $3.44-$3.68 band. The midpoint of management’s 2020 EPS guidance is $3.56, marginally higher than the current Zacks Consensus Estimate of $3.55 for the period.

Capital expenditure view including asset removal costs is increased to $500-$525 million from $475 million, primarily due to the extension of services to new customers.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

At this time, ONE Gas has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

ONE Gas has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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