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.

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.What are the underlying business or industry changes driving this perspective?

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.

Analysts Cite Supportive Legislation and Raised Earnings Outlook in ONE Gas Valuation Update