OGS: Supportive Texas Legislation And Interest Rates Will Shape Future Prospects

Analysts have nudged their price targets for ONE Gas higher, with a modest fair value adjustment to approximately $85 per share. This reflects improved earnings visibility, supportive Texas legislation, and a more balanced valuation backdrop.

Analyst Commentary

Recent Street research shows sentiment on ONE Gas gradually improving, with a series of price target increases and rating upgrades reflecting higher confidence in earnings durability and policy support.

Bullish Takeaways

• Bullish analysts highlight an improved earnings outlook, supported by constructive Texas legislation and interest rate tailwinds that enhance visibility on long term cash flows.
• Several target price increases, into the mid 70s to mid 80s per share range, are framed as a response to a more balanced valuation profile rather than aggressive multiple expansion, suggesting room for further upside if execution remains solid.
• Supportive regulation and upcoming rate and regulatory catalysts are viewed as key drivers that could sustain above trend rate base growth and underpin steady dividend capacity.
• The stock is seen as attractively valued relative to fully regulated peers, with a modest discount attributed to past uncertainty that bullish analysts believe is now easing as policy and funding risks abate.

Bearish Takeaways

• Bearish analysts maintain a more cautious stance, keeping ratings neutral and arguing that after the recent rerating, the shares are closer to fair value, limiting near term upside.
• Some still point to the sector's uneven performance versus the broader market and flag the risk that a reversal in interest rate trends could compress valuation multiples for utilities, including ONE Gas.
• There is lingering concern that slower than expected execution on data center and infrastructure related growth opportunities, or delays in regulatory decisions, could cap earnings growth versus more optimistic scenarios.
• Earlier target cuts underscore that, despite recent improvements, sensitivity to macro conditions and regulatory timelines remains a key constraint on multiple expansion.

What's in the News

• ONE Gas announced a joint infrastructure initiative with Western Farmers Electric Cooperative, committing approximately $120 million to a 43 mile, large diameter natural gas pipeline that will supply over 100 billion cubic feet of gas annually to support 400 megawatts of natural gas fueled generation at the Hugo Plant by 2029, with project completion targeted for the third quarter of 2028 (Key Developments).
• The overall southeast Oklahoma pipeline project is expected to total $150 to $160 million in investment, connecting the Bennington Natural Gas Hub to WFEC’s Hugo Plant and aiming to enhance regional energy reliability and support long term economic growth (Key Developments).
• ONE Gas issued 2026 earnings guidance and forecast net income of $294 million to $302 million and earnings per diluted share of $4.65 to $4.77 (Key Developments).
• The company narrowed its 2025 earnings guidance range to net income of $262 million to $266 million and EPS of $4.34 to $4.40. The guidance maintains midpoints that are 2.5% above original forecasts (Key Developments).
• ONE Gas adopted amended and restated bylaws effective November 19, 2025. The revisions expand who may call special Board and committee meetings to include the chair, lead independent director, Corporate Governance Committee chair, or a quorum of directors, which may improve governance flexibility and responsiveness (Key Developments).

Valuation Changes

• Fair Value Estimate edged down slightly from about $86.07 to $84.86 per share, reflecting a modestly more conservative intrinsic valuation.
• Discount Rate was effectively unchanged, moving fractionally from 6.96 percent to 6.96 percent, indicating a stable risk and cost of capital assumption.
• Revenue Growth was revised down modestly, from approximately 3.40 percent to 3.23 percent, implying slightly slower expected top line expansion.
• Net Profit Margin ticked up marginally, from about 12.89 percent to 12.92 percent, signaling a small improvement in projected profitability.
• Future P/E eased slightly, from roughly 18.72x to 18.51x, pointing to a minor compression in the forward valuation multiple.