Investors in ONE Gas, Inc. (NYSE:OGS) had a good week, as its shares rose 6.2% to close at US$73.67 following the release of its quarterly results. It looks like a credible result overall - although revenues of US$245m were in line with what the analysts predicted, ONE Gas surprised by delivering a statutory profit of US$0.39 per share, a notable 12% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the six analysts covering ONE Gas are now predicting revenues of US$1.64b in 2021. If met, this would reflect a meaningful 9.6% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to increase 7.9% to US$3.85. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.64b and earnings per share (EPS) of US$3.85 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$78.63, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic ONE Gas analyst has a price target of US$83.00 per share, while the most pessimistic values it at US$69.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting ONE Gas' growth to accelerate, with the forecast 9.6% growth ranking favourably alongside historical growth of 1.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.9% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ONE Gas to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$78.63, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for ONE Gas going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for ONE Gas (1 is a bit unpleasant!) that you need to be mindful of.
If you decide to trade ONE Gas, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.