ONE Gas: More Than Meets the Eye
ONE Gas, Inc. (NYSE: OGS) is a well-known name in the U.S. utility sector, delivering natural gas to over 2.3 million customers in Oklahoma, Kansas, and Texas. At a glance, the stock appears attractively priced — but behind the numbers lies a more complex picture that investors need to understand.
Strong Quarterly Results, But Annual Earnings Slipped
The company reported a strong fourth quarter for 2024, with net income of $77 million, or $1.34 per diluted share, up from $70.7 million the year before. However, the full-year results tell a different story. Annual net income dropped to $222.9 million, down from $231.2 million in 2023. This dip was largely due to increased employee-related expenses and higher depreciation stemming from capital investments.
Guidance for 2025 Signals Optimism
Looking forward, ONE Gas projects net income between $254 million and $261 million for 2025. Earnings per share are expected to fall between $4.20 and $4.32. Capital expenditures are also forecasted to rise, with a projected investment of around $750 million—mostly directed at infrastructure integrity and expansion projects across Texas and Oklahoma.
Aggressive Long-Term Growth Plan
The company has laid out a five-year capital plan totaling $4 billion, aimed at maintaining system safety and expanding capacity. ONE Gas expects its regulated rate base to grow at an annual rate of 7% to 9%, with similar growth expected in net income. However, EPS growth is expected to be more modest, in the 4% to 6% range. Notably, management aims to contain operating costs, forecasting only 4% annual increases compared to the previous 5% average.
The Market Isn’t Fully Convinced
As of early April 2025, ONE Gas was trading at around $71.88. Analysts currently rate the stock as a "Hold," with a 12-month price target near $70.92. This suggests that even though the fundamentals are solid, market expectations are somewhat muted, likely due to the high costs of growth and relatively flat EPS projections.
Final Thoughts: A Value Trap or Long-Term Opportunity?
ONE Gas may look like a bargain at first, especially for income-focused investors seeking stable utility plays. But a deeper dive reveals that rising expenses and large capital outlays could weigh on returns in the short to mid term. The company's strategy is built around long-term infrastructure growth and regulatory stability, but that comes with slower EPS growth and ongoing cost pressure. Investors should consider whether the risk-reward profile matches their portfolio goals.