New Forecasts: Here's What Analysts Think The Future Holds For ONE Gas, Inc. (NYSE:OGS)

ONE Gas, Inc. (NYSE:OGS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline. Investor sentiment seems to be improving too, with the share price up 4.9% to US$80.74 over the past 7 days. Could this big upgrade push the stock even higher?

Following the latest upgrade, ONE Gas' five analysts currently expect revenues in 2023 to be US$2.7b, approximately in line with the last 12 months. Statutory earnings per share are forecast to be US$4.15, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of US$2.3b and earnings per share (EPS) of US$4.14 in 2023. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.

Check out our latest analysis for ONE Gas

Even though revenue forecasts increased, there was no change to the consensus price target of US$79.17, suggesting the analysts are focused on earnings as the driver of value creation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic ONE Gas analyst has a price target of US$84.00 per share, while the most pessimistic values it at US$70.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that ONE Gas' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 1.3% growth on an annualised basis. This is compared to a historical growth rate of 9.5% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 2.0% annually. Factoring in the forecast slowdown in growth, it seems obvious that ONE Gas is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at ONE Gas.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple ONE Gas analysts - going out to 2025, and you can see them free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.