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

Analysts have nudged our price target for ONE Gas modestly higher from approximately $85.36 to $86.07, as improving earnings visibility, supportive Texas legislation, and interest rate tailwinds reinforce a slightly stronger long term growth and valuation outlook.

Analyst Commentary

Recent Street research reflects a meaningfully improved stance on ONE Gas, with several firms lifting ratings and price targets as they reassess the company’s growth, risk profile, and relative valuation within the regulated utilities space.

Bullish Takeaways

Bullish analysts highlight a more constructive earnings outlook, citing clearer visibility on growth drivers and regulatory outcomes that support a modest upward reset in valuation.
Supportive Texas legislation and interest rate tailwinds are viewed as structural positives that can enhance cash flow durability and reduce perceived risk, which some analysts believe justifies higher price targets.
Some upgrades point to an attractive valuation relative to fully regulated peers, with ONE Gas still trading at a modest discount despite a strong balance sheet and stable business mix.
Upcoming regulatory catalysts and evolving infrastructure needs, including potential data center related demand, are seen as incremental opportunities that could support sustained rate base growth.

Bearish Takeaways

Bearish analysts maintain a more cautious stance, viewing the shares as fairly valued after the recent rerating, with limited near term upside versus the broader utilities group.
There is ongoing concern that execution around future capital plans and regulatory approvals must remain flawless to justify higher multiples, given the already supportive policy backdrop.
Some research commentary emphasizes that sector performance remains sensitive to macro shifts, including potential reversals in interest rate trends, which could compress valuations again.
Equal weight style views suggest that while fundamentals are improving, ONE Gas may still track in line with, rather than materially outperform, the broader regulated utilities universe.

What's in the News

Issued initial 2026 earnings guidance, targeting net income of $294 million to $302 million and earnings per diluted share of $4.65 to $4.77, reinforcing a multi-year growth narrative and visibility into forward returns (Key Developments).
Narrowed 2025 financial guidance range to net income of $262 million to $266 million and EPS of $4.34 to $4.40, maintaining midpoint growth of 2.5 percent above original forecasts and signaling confidence in near-term execution (Key Developments).
Board adopted amended and restated bylaws, expanding authority to call special board and committee meetings to the chair, lead independent director, Corporate Governance Committee chair, or any quorum-sized group of directors, potentially improving governance responsiveness and oversight (Key Developments).

Valuation Changes

Fair Value Estimate rose slightly from approximately $85.36 to $86.07 per share, reflecting a modestly stronger long term outlook.
The discount rate remained effectively unchanged at about 6.96 percent, indicating a stable risk and return assumption in the valuation model.
Revenue growth was nudged slightly higher from roughly 3.39 percent to 3.40 percent, signaling a marginally more constructive top line trajectory.
Net profit margin edged down slightly from about 12.92 percent to 12.89 percent, suggesting a modestly more conservative view on profitability.
Future P/E increased slightly from roughly 18.53x to 18.72x, implying a small upward adjustment in the valuation multiple applied to forward earnings.

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.

How well do narratives help inform your perspective?

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