In a report released today, Julien Dumoulin Smith from Jefferies upgraded ONE Gas (OGS – Research Report) to a Buy, with a price target of $84.00.
Julien Dumoulin Smith has given his Buy rating due to a combination of factors that highlight ONE Gas’s defensive attributes and potential for upside. The company has shown resilience by outperforming its sector year-to-date and is positioned to benefit from anticipated Federal Reserve rate cuts and an economic slowdown. Despite its underperformance over the past five years, ONE Gas’s current valuation at an average electric multiple presents an opportunity for investors seeking a lower-risk utility investment.
Additionally, the company’s regulatory environment is stable, with modest rate increases expected to face minimal pushback. The decline in natural gas prices further improves the outlook for customers, enhancing affordability and reducing risk. Furthermore, ONE Gas’s unique financing strategy, which relies more on short-term debt, could become advantageous if interest rates decrease, potentially boosting earnings per share. Overall, the valuation of ONE Gas is considered reasonable, trading at a discount compared to other defensive utilities, which supports the Buy rating.