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ONE Gas (NYSE:OGS) -2.2% in Wednesday’s trading after Bank of America downgraded the stock to Underperform from Neutral with a $60 price target, slashed from $80, saying an “underappreciated financing headwind for short-term debt and a rising pension expense defer meaningful EPS growth beyond 2025.”
BofA’s Julien Dumoulin-Smith now forecasts a less than 5% earnings per share growth rate for 2023-27, below ONE Gas’ (OGS) regulated natural gas utility peers, and the midpoint of the company’s stated 4%-6% EPS growth target range.
Refinancing of $300M utility-level long-term debt and $473M of short-term, non-directly related to the utility will present a $0.40/share headwind to 2024 and a $0.48 headwind to 2025, Dumoulin-Smith said.
As a small-cap natural gas utility with three primary jurisdictions, ONE Gas (OGS) has less flexibility to offset higher operating and financing costs than large-cap electric peers, the analyst also noted.
