ONE Gas, Inc. Recorded A 28% Miss On Revenue: Analysts Are Revisiting Their Models

ONE Gas, Inc. (NYSE:OGS) shareholders are probably feeling a little disappointed, since its shares fell 2.7% to US$64.09 in the week after its latest first-quarter results. Revenues were US$758m, 28% shy of what the analysts were expecting, although statutory earnings of US$1.75 per share were roughly in line with what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for ONE Gas

Taking into account the latest results, the consensus forecast from ONE Gas' seven analysts is for revenues of US$2.23b in 2024. This reflects a credible 6.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to reduce 4.4% to US$3.85 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$2.41b and earnings per share (EPS) of US$3.86 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The consensus has reconfirmed its price target of US$62.50, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on ONE Gas' market value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values ONE Gas at US$65.00 per share, while the most bearish prices it at US$58.00. With such a narrow range of valuations, the 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. We would highlight that ONE Gas' revenue growth is expected to slow, with the forecast 8.5% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. Compare this to the 14 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 8.3% per year. Factoring in the forecast slowdown in growth, it looks like ONE Gas is forecast to grow at about the same rate as 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. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$62.50, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on ONE Gas. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple ONE Gas analysts - going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for ONE Gas you should be aware of, and 1 of them is a bit unpleasant.

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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.