ONE Gas (OGS) Rides on Regulated Operations, Customer Growth

ONE Gas, Inc.’s OGS ongoing capital expenditures for pipeline integrity and extension of services to new areas will further boost its performance. The company is expected to benefit from 100% regulated operations and a high percentage of residential customers.

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

Tailwinds

ONE Gas anticipates capital expenditures, including asset removal costs, to be approximately $750 million in 2024. It expects capital expenditures to be $4.25 billion or in the range of $750-$950 million per year during 2024-2028.

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.

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 the company’s customers are from the residential category.

OGS 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, with 23,000 new customers added in 2023.

Headwinds

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.

The sale of natural gas to residential and commercial customers is a seasonal business, as a substantial portion of their natural gas requirements are for heating. Also, a warmer-than-expected winter would have an adverse impact on OGS’ profitability.

Stocks to Consider

Some better-ranked stocks from the same sector are Atmos Energy ATO, MDU Resources Group MDU and NiSource Inc. NI, 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 7.26%. The Zacks Consensus Estimate for ATO’s fiscal 2024 EPS implies a year-over-year improvement of 8%.

MDU’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for MDU’s 2024 EPS implies a year-over-year decrease of 0.7%.

NiSource’s long-term earnings growth rate is 7.15%. The Zacks Consensus Estimate for NI’s 2024 EPS indicates year-over-year growth of 6.9%.

 

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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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