Morgan Stanley analyst David Arcaro maintained a Hold rating on ONE Gas (OGS – Research Report) today and set a price target of $62.00.
Geoff Meacham has given his Hold rating due to a combination of factors surrounding ONE Gas’s updated financial outlook. The company’s 2024 EPS guidance fell short of expectations, showing a -7% deviation below the previous midpoint, while anticipated equity needs are higher than initially forecasted. This disappointing EPS forecast is compounded by a downward revision in dividend growth, now targeting a 1-2% increase compared to the previous 4-6% range. Moreover, the need for significant equity issuances, representing 45-50% of total financing through 2028, suggests a potential dilution of current shareholders’ interests and signals financial pressure.
Additionally, ONE Gas is facing increased operating costs, averaging a 5% annual rise through 2028, which will not be entirely compensated through regulatory mechanisms. While customer sales growth remains relatively stable, the slight decrease in the projected compound annual growth rate (CAGR) adds to the company’s challenges. The substantial portion of the company’s debt maturing in the first quarter of 2024, coupled with higher-than-expected interest rates, further exacerbates the financial strain by increasing the cost of debt servicing. These factors collectively contribute to the decision to maintain a Hold rating for ONE Gas, as near-term financial headwinds may offset the company’s longer-term growth potential.
According to TipRanks, Arcaro is a 2-star analyst with an average return of -0.4% and a 44.62% success rate. Arcaro covers the Utilities sector, focusing on stocks such as NextEra Energy, ONE Gas, and Constellation Energy Corporation.
In another report released today, Mizuho Securities also maintained a Hold rating on the stock with a $63.00 price target.
See the top stocks recommended by analysts >>
TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.
ONE Gas (OGS) Company Description:
ONE Gas, Inc. engages in the provision of natural gas distribution services. It also offers natural gas to residential, commercial, industrial, and transportation customers. The company was founded in 1906 and is headquartered in Tulsa, OK.
Read More on OGS:
