Last Update 22 Nov 25
Fair value Increased 3.46%OGS: Future Texas Legislation And Regulatory Outcomes Will Influence Performance Outlook
ONE Gas saw its analyst price target raised from $82.50 to $85.36. Analysts cited an improved earnings outlook, positive effects from Texas legislation, and a more balanced valuation in their updated assessments.
Analyst Commentary
Recent Street research presents a mixed outlook for ONE Gas, highlighting both supportive factors and ongoing challenges as seen in the latest analyst actions and commentary.
Bullish Takeaways- Analysts have raised price targets in response to an improved earnings outlook and benefits from recently enacted Texas legislation, which is viewed as supportive for regulated utilities.
- ONE Gas is believed to have a strong balance sheet, and its shares are considered attractively valued compared to industry peers, even though it operates as a fully regulated utility.
- Interest rate tailwinds are noted as a positive factor for future growth and margin expansion.
- Regulatory catalysts ahead, combined with a more balanced valuation, are expected to drive continued upside potential for the stock.
- While there have been target price increases, some analysts have maintained neutral outlooks, citing that utilities as a sector have underperformed broader market returns in recent periods.
- There are continuing concerns around the pace of sector growth, specifically regarding developments in data center pipelines and interconnection timelines that may impact future utility demand.
- Cautious analysts remain attentive to valuation risks, emphasizing that while the outlook has improved, execution and regulatory outcomes will be key to sustaining performance.
What's in the News
- ONE Gas Board of Directors adopted amended and restated By-laws, allowing special meetings of the Board or its committees to be called by the chair, lead independent director, governance chair, or a quorum of directors. This change is effective November 19, 2025 (Key Developments).
- The company updated its 2025 earnings guidance, narrowing the net income range to $262 million to $266 million and earnings per diluted share to approximately $4.34 to $4.40. The midpoints remain unchanged and are 2.5% higher than original forecasts (Key Developments).
Valuation Changes
- Consensus Analyst Price Target increased modestly from $82.50 to $85.36. This reflects a more favorable market outlook.
- Discount Rate rose slightly, moving from 6.78% to 6.96%. This indicates a marginal adjustment in perceived risk or required return.
- Revenue Growth expectations climbed from 1.6% to 3.4%. This suggests a more optimistic outlook for top-line expansion.
- Net Profit Margin edged down from 13.65% to 12.92%. This signals anticipated pressure on operational profitability.
- Future P/E ratio declined from 21.05x to 18.53x. This points to a more attractive valuation based on updated forecasted earnings.
Key Takeaways
- Sustained regional growth and regulatory support enable steady customer additions, reliable revenue streams, and improved profit margins for ONE Gas.
- Ongoing investments in infrastructure and rising commercial demand position the company for scalable expansion and enhanced long-term earnings.
- High capital spending, regional concentration, rising costs, regulatory dependence, and industry decarbonization trends threaten long-term margin stability and growth prospects.
Catalysts
About ONE Gas- Operates as a regulated natural gas distribution utility company in the United States.
- Sustained population growth and urbanization in Texas, Oklahoma, and Kansas is fueling above-trend new customer additions-including a 9% year-over-year jump in new meters installed-that supports persistent, organic top-line revenue growth.
- The shift toward electrification is gradual, with natural gas remaining the preferred and affordable solution for heating, cooking, and industrial use in ONE Gas's core regions; this underpins stable customer retention and long-term regulated revenue visibility.
- Favorable regulatory developments, particularly Texas House Bill 4384, enable full recovery of capital expenditures and reduce regulatory lag, which is anticipated to drive higher earnings and more predictable net profit margins in the coming years.
- Accelerating capital investment in system reinforcement and modernization (such as the Austin system project), in response to both safety and demand, expands the regulated rate base, resulting in higher allowed returns and EPS growth.
- Robust inbound commercial and industrial demand-including interest from data centers and advanced manufacturing-creates scalable growth opportunities likely to drive incremental revenue and bolster earnings over the medium to long term.
ONE Gas Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming ONE Gas's revenue will grow by 3.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 10.6% today to 12.5% in 3 years time.
- Analysts expect earnings to reach $322.7 million (and earnings per share of $4.97) by about September 2028, up from $247.7 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.5x on those 2028 earnings, up from 18.1x today. This future PE is greater than the current PE for the US Gas Utilities industry at 17.6x.
- Analysts expect the number of shares outstanding to grow by 5.9% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
ONE Gas Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Sustained high capital expenditure requirements for system safety, integrity, and growth-including major projects like Austin system reinforcement-may outpace revenue increases, potentially compressing long-term free cash flow and net margins if regulatory cost recovery does not keep pace.
- The company's focus on growth opportunities within a geographically limited footprint (Texas, Oklahoma, Kansas) increases exposure to localized weather extremes (e.g., record rainfall and flooding) and regional economic/regulatory risks, which could heighten earnings volatility and limit revenue diversification.
- Rising labor and operating expenses (7.5% year-over-year O&M growth in the quarter) reflect inflationary pressures that may erode net margins over time, especially if future rate increases struggle to keep pace with cost escalation.
- Expansion and investment strategies are heavily reliant on supportive regulatory outcomes and recent legislative actions (e.g., Texas House Bill 4384); any reversal or limitation in future political/regulatory support or consumer pushback could negatively impact allowed returns and revenue growth.
- Long-term industry headwinds-including increasing electrification, policy-driven decarbonization, and possible restrictions on new natural gas hookups-may eventually dampen incremental customer growth and throughput, threatening future top-line revenue and earnings growth despite current demand trends.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $76.667 for ONE Gas based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $89.0, and the most bearish reporting a price target of just $66.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.6 billion, earnings will come to $322.7 million, and it would be trading on a PE ratio of 20.5x, assuming you use a discount rate of 6.8%.
- Given the current share price of $74.71, the analyst price target of $76.67 is 2.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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