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ONE Gas (OGS) Provides Five-Year Growth Plan, Trims '21 View

ONE Gas Inc. OGS has issued its updated five-year growth plan ending 2026 and narrowed its 2021 earnings guidance. ONE Gas has also provided a new emission reduction target and is focused on vintage pipeline replacement.

ONE Gas has narrowed its 2021 earnings per share guidance to the range of $3.83-$3.87 from the prior expectation of $3.80-$3.90. The mid-point of the new expected range is $3.85 per share, which is higher than the current Zacks Consensus Estimate of $3.84. Net income for 2021 is now expected in the range of $206-$208 million, down from the prior expectation of $204-$209 million.

ONE Gas plans to cut emissions from distribution operations and aims to reduce methane emissions by old pipeline replacement. By 2035, ONE Gas expects to achieve a 55% reduction in emissions from a 2005 base through repair and replacement of distribution pipelines.

2022 Guidance Issued

ONE Gas has issued its guidance for 2022 net income in the range of $215-$227 million, whose midpoint is $221 million, indicating 6.8% year-over-year growth. Earnings per share for 2022 are expected in the range of $3.96-$4.20, with the midpoint being $4.08, slightly lower than the current Zacks Consensus Estimate of $4.09.

The year-over-year improvement in earnings per share expectation for 2022 is primarily due to the implementation of new rates and customer growth, marginally offset by higher operating expenses.

ONE Gas’ board of directors approved an increase in the quarterly dividend rate to 62 cents per quarter. The annualized dividend of $2.48 per share reflects a year-over-year increase of 6.9%. 

Five-Year Growth View Raised

ONE Gas now expects capital expenditure for five years ending 2026, including asset removal costs, in the range of $650-$750 million per year. Total capital expenditure for the 2022-2026 time period is expected to be $3.5 billion, indicating a 19% increase from the previous five-year period.

OGS aims to allocate more than 65% of the total capital investment to system integrity and replacement projects. ONE Gas anticipates strong growth, primarily in Texas and Oklahoma. Net income of OGS is expected to increase by an average of 8-10% annually through 2026, up from 6-8% expected earlier, and earnings per share are projected to rise 6-8%, up from 5-7%. The average annual dividend growth rate is expected to remain within 6-8% through 2026, subject to the board of directors' approval.

Operating expenses for the 2022-2026 time frame are expected to increase on an average by 4% per year, indicating an increase of 100 basis points from the prior five-year period.

Price Performance

In the past six months, shares of OGS have gained 9%, outperforming the industry’s 7.7% growth.

Image Source: Zacks Investment Research

Zacks Rank & Other Key Picks

ONE Gas currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Atmos Energy ATO, MDU Resources Group MDU and ONEOK Inc. OKE, each having a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term (three to five years) earnings growth of Atmos Energy, MDU Resources, and ONEOK is currently pegged at 7.3%, 6.8%, and 7.8%, respectively.

The Zacks Consensus Estimate for ONEOK’s 2022 earnings per share has moved up 2.7% in the past 90 days. In the same time frame, fiscal 2022 earnings estimates of Atmos Energy have moved up 1.3%. MDU Resources’ 2022 earnings estimates have moved up 0.9% in the past 60 days.


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