ONE Gas (OGS) Down 19.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for ONE Gas (OGS). Shares have lost about 19.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ONE Gas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ONE Gas Q4 Earnings Beat Estimates, Revenues Miss

ONE Gas reported fourth-quarter 2019 earnings of 96 cents per share, which surpassed the Zacks Consensus Estimate of 95 cents by 1.1%.

The figure also rose 14.3% from the year-ago level driven by new rates, and residential customer growth in Oklahoma and Texas.

Total Revenues

The company recorded total revenues of $453 million in the fourth quarter, which missed the Zacks Consensus Estimate of $468 million by 3.3%. Revenues also declined 2.6% from the year-ago level.

Quarterly Highlights

Total operating expenses in the reported quarter increased 9.2% from the year-ago figure to $179.92 million.

Operating income in the reported quarter increased 1.2% year over year to $81.9 million.

The company incurred interest expenses of $15.7 million, up 7.5% from the prior-year figure. The increase in expenses was due to refinancing of its senior notes.

Financial Highlights

As of Dec 31, 2019, ONE Gas had cash and cash equivalents of $17.9 million compared with $21.3 million in the corresponding period of 2018.

Long-term debt (excluding current maturities) was $1,286.1 million as of Dec 31, 2019, up from the comparable year-ago level of $1,285.5 million.

The company’s cash flow from operating activities in 2019 was $310.4 million compared with $467.7 million a year ago.

Guidance

ONE Gas has maintained its 2020 guidance, declared on Jan 21, 2020, for net income in the range of $186-$198 million. Its earnings per share guidance is projected in the range of $3.44-$3.68. The midpoint of management’s 2020 EPS guidance is $3.56, lower than the current Zacks Consensus Estimate of $3.62 for the period.

The company’s capital expenditures guidance, including asset removal costs, is estimated to be $475 million for 2020. Out of this, 70% will be directed toward system integrity and replacement projects.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, ONE Gas has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ONE Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.