On Monday, Jefferies initiated coverage on ONE Gas Inc. (NYSE:OGS) shares with a Hold rating and a price target of $79.00. The firm highlighted the company's efforts to stabilize after a period marked by significant earnings volatility. With a projected earnings per share (EPS) compound annual growth rate (CAGR) of approximately 5% from 2025 to 2029, ONE Gas is expected to get back on track.
The analyst pointed out that ONE Gas is currently trading at a 4% premium compared to its gas utility peers. This is attributed to its stable regulatory outlook, strong balance sheet, and the fact that 90% of its capital expenditures are recoverable through existing mechanisms. Despite the premium, the company's normalized EPS growth is considered below average, ranging between 4-6%.
Jefferies' assessment reflects a cautious optimism about ONE Gas's future performance. The company's solid financial position and regulatory environment are seen as positive factors. However, the analyst suggests that there may be more attractive risk/return opportunities available within the electric utilities sector.
The firm's stock price target of $79.00 implies a total shareholder return (TSR) of 12.5%. This target takes into account the anticipated growth and the current market conditions surrounding ONE Gas. The Hold rating indicates that the firm does not see significant upside or downside potential in the stock at the current price level.
The initiation of coverage by Jefferies on ONE Gas provides investors with a comprehensive view of the company's financial health and market position. The Hold rating and price target reflect a balanced perspective on the company's prospects in the near to medium term.
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