Mizuho Securities has maintained a Neutral rating on ONE Gas Inc. (NYSE: NYSE:OGS), yet increased the stock's price target to $76 from $65.
The adjustment reflects a positive shift in market sentiment towards the company, as it begins to recover from a series of setbacks in previous years.
ONE Gas had been viewed as a less favorable local distribution company (LDC) following a string of disappointing guidance updates throughout 2022 and 2023.
However, recent developments have led to a modest premium in its valuation, now slightly above the industry average. This change is attributed to factors such as the company's advantageous position in a declining interest rate environment, the easing of operations and maintenance (O&M) inflation, and a series of regulatory victories.
Although the firm's outlook has improved, Mizuho does not expect ONE Gas to regain the significant premium over its peers that it once held, which averaged +1.5x over five years, until it can consistently meet multi-year guidance targets and restore its historically strong customer growth rate.
In other recent news, ONE Gas, Inc. has made significant financial developments. The natural gas distributor has expanded its credit facility from $1.275 billion to $1.35 billion, with The Huntington National Bank joining as a new lender. This move adds $75 million to the company's credit facility, bolstering its financial flexibility.
ONE Gas also reported a robust first quarter performance for 2024, with net income reaching $99 million, driven by new rates and customer growth. The company's board of directors declared a quarterly dividend of 66 cents per share, aligning with the previously indicated anticipation for the year 2024.
In the realm of analyst adjustments, Wells Fargo upgraded its rating for ONE Gas from Equal Weight to Overweight, increasing the price target to $80.00. This upgrade indicates confidence in the company's potential for a stable earnings forecast, with an expected long-term earnings per share growth rate of 5-7%.
Stifel maintained a Hold rating on ONE Gas but raised the price target to $71, following the company's second-quarter results. Meanwhile, Mizuho revised its price target for ONE Gas to $65, maintaining a neutral stance.
InvestingPro Insights
Recent data from InvestingPro adds depth to Mizuho's analysis of ONE Gas Inc. (NYSE:OGS). The company's P/E ratio stands at 18.64, slightly above Mizuho's target multiple of 16.5x, suggesting the stock may be fairly valued or slightly overvalued at current levels. This aligns with Mizuho's Neutral rating and the view that ONE Gas is now trading at a modest premium to industry averages.
InvestingPro Tips highlight that ONE Gas has raised its dividend for 10 consecutive years, with a current dividend yield of 3.57%. This consistent dividend growth may be attractive to income-focused investors and supports the company's recovery narrative. Additionally, the stock is trading near its 52-week high, with a price at 98.51% of its peak, corroborating Mizuho's observation of improved market sentiment.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into ONE Gas's financial health and market position.
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