On Wednesday, Wells Fargo (NYSE:WFC) shifted its rating for ONE Gas Inc. (NYSE:OGS) from Equal Weight to Overweight, increasing the price target to $80.00 from the previous $71.00. The upgrade reflects the firm's belief in the company's potential for a more stable earnings forecast.
According to the analyst, ONE Gas is expected to experience a long-term earnings per share (EPS) growth rate of 5-7%, which is a rise from the current 4-6% guidance. The projection is based on an estimated 6.5% growth through 2028, using the 2024 expected base, which may be conservative due to regulatory lag.
The analyst highlighted several factors contributing to the positive outlook for ONE Gas. The company's strong balance sheet was noted as a key element, along with a regulatory environment that is both supportive and showing signs of potential improvement. Additionally, ONE Gas's attractive service territory was mentioned as a reason for the stock to potentially command a premium in the market over the next 12-18 months.
ONE Gas has been working within a framework of regulatory constraints, but the analyst's commentary suggests that the current lag in this area might be temporary. The anticipated return to a more predictable earnings outlook is based on the assumption that regulatory conditions will become more favorable for the company.
The upgrade by Wells Fargo indicates a confidence in ONE Gas's ability to outperform its peers in the coming year and a half. With the revised price target of $80.00, Wells Fargo signals its belief that the stock offers an appealing investment opportunity at its current valuation.
In other recent news, ONE Gas Inc. has announced noteworthy financial developments. The company reported strong first quarter performance for 2024, with net income reaching $99 million, driven by new rates and customer growth.
Despite a 5% increase in operations and maintenance expenses, ONE Gas remains on track to meet its 2024 financial guidance. Stifel maintained its hold rating but raised ONE Gas's price target to $71, following the company's second-quarter results. Meanwhile, Mizuho also revised its price target for the company to $65, maintaining a neutral stance.
In terms of capital management, ONE Gas has expanded its revolving credit facility by $75 million, bringing the total commitment to $1.275 billion. This strategic move is part of the company's ongoing financial operations amidst evolving energy market dynamics. Additionally, ONE Gas's board of directors has declared a quarterly dividend of 66 cents per share, aligning with the previously indicated anticipation for the year 2024.
InvestingPro Insights
In light of Wells Fargo's recent upgrade of ONE Gas Inc. (NYSE:OGS), examining the company through the lens of InvestingPro data and tips can provide additional context for investors. Notably, ONE Gas has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years, which is a testament to its financial stability and management's confidence in its business model. Furthermore, the company's stock is known for low price volatility, providing a sense of security for investors who value consistency in their portfolio.
From a financial perspective, ONE Gas's market capitalization stands at approximately $3.97 billion, with a P/E ratio of 17.6, reflecting a market valuation that considers its earnings power. The company's revenue for the last twelve months as of Q2 2024 was $2.05 billion, although it experienced a revenue decline of 21.23% during the same period. Despite this, analysts remain optimistic about the company's profitability, predicting a profitable year ahead. Additionally, ONE Gas has shown a strong return over the last three months, with a 16.35% price total return, signaling potential momentum in its stock performance.
Investors interested in ONE Gas can find more InvestingPro Tips, which offer deeper insights and analysis, by visiting the dedicated page for ONE Gas on InvestingPro. Currently, there are several additional tips available, providing a comprehensive view of the company's financial health and market position.
Overall, the positive sentiment from Wells Fargo is echoed in the InvestingPro Tips and data, suggesting that ONE Gas is well-positioned to navigate the regulatory landscape and continue its trajectory of growth and stability.
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