Atmos Energy (ATO) AI Stock Analysis

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Atmos Energy

(NYSE:ATO)

77Outperform

Atmos Energy's overall score reflects its strong financial performance, particularly in profitability and financial stability, countered by cash flow challenges. Technical indicators suggest a positive momentum, while the valuation remains reasonable. The recent earnings call provides a positive outlook with notable growth and investment plans, though Moody's negative rating outlook due to increased expenses poses some risk.

Positive Factors

Financial Performance

ATO reported FY24 EPS of $6.83/sh, beating Mizuho and consensus estimates and topping the high-end of guidance range.

Growth Potential

ATO's sector-leading 13-15% rate base growth translates to top-tier 6-8% EPS/dividend growth.

Strategic Positioning

ATO has a diversified 8-state footprint in pro-gas jurisdictions with favorable exposure to growth trends in Texas.

Negative Factors

Credit Rating Concerns

There is an anticipated downgrade in Atmos Energy's credit rating due to financial trends and changes in tax status.

Financial Burden

ATO increased its financing budget by 50% to support the new capex outlook, which could cause concerns about additional financial burden.

Funding and Equity

Considerable dependence on external equity could be a risk in case of a market downturn and lead to more EPS dilution.

Atmos Energy (ATO) vs. S&P 500 (SPY)

Market Cap

$25.01B

Dividend Yield2.13%

Average Volume (3M)1.07M

Price to Earnings (P/E)22.5

Beta (1Y)0.34

Revenue Growth5.90%

EPS Growth11.85%

CountryUS

Employees5,260

SectorUtilities

Sector Strength88

IndustryRegulated Gas

Share Statistics

EPS (TTM)6.99

Shares Outstanding158,728,200

10 Day Avg. Volume1,376,387

30 Day Avg. Volume1,068,284

Financial Highlights & Ratios

PEG Ratio1.90

Price to Book (P/B)N/A

Price to Sales (P/S)5.64

Price to Cash Flow (P/CF)20.90

P/FCF Ratio20.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$156.86

Price Target Upside-0.43% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering9

Atmos Energy Business Overview & Revenue Model

Company DescriptionAtmos Energy Corporation, together with its subsidiaries, engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. It operates through two segments, Distribution, and Pipeline and Storage. The Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately three million residential, commercial, public authority, and industrial customers. As of September 30, 2021, it owned 71,921 miles of underground distribution and transmission mains. The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage reservoirs in Texas; and provides ancillary services to the pipeline industry, including parking arrangements, lending, and inventory sales. As of September 30, 2021, it owned 5,699 miles of gas transmission lines. Atmos Energy Corporation was founded in 1906 and is headquartered in Dallas, Texas.

How the Company Makes MoneyAtmos Energy generates revenue primarily through its regulated natural gas distribution operations. The company earns money by charging customers for the natural gas they consume, as well as for services related to its delivery, including infrastructure maintenance and improvements. Rates are set by regulatory authorities and are designed to allow the company to recover its costs and earn a reasonable return on investment. Additionally, Atmos Energy's Pipeline and Storage segment contributes to revenue by charging fees for the transportation and storage of natural gas. This segment benefits from long-term contracts with various third-party customers, providing a stable and predictable revenue stream. The company's earnings are significantly influenced by regulatory decisions, natural gas market prices, and weather conditions, which can affect consumption levels.

Atmos Energy Financial Statement Overview

Summary

Atmos Energy shows strong profitability with high net and gross profit margins, and a solid financial position with low leverage. However, cash flow challenges persist, particularly in generating positive free cash flow.

Income Statement

Very Positive

Atmos Energy demonstrates strong profitability with a net profit margin of 25.9% in the TTM. The gross profit margin is also robust at 51.7%, indicating efficient cost management. Revenue growth has been inconsistent, but recent figures show stability. EBIT and EBITDA margins are healthy, signifying operational efficiency.

Balance Sheet

Positive

The balance sheet is strong with a low debt-to-equity ratio of 0.0005, reflecting low leverage and financial stability. The equity ratio of 86.8% indicates a solid equity base. Return on equity is impressive at 4.3%, showcasing effective utilization of shareholder funds.

Cash Flow

Positive

Free cash flow is negative, indicating potential issues in covering capital expenses with operating cash. The operating cash flow to net income ratio is strong at 1.63, showing good cash generation relative to net income. However, the free cash flow to net income ratio is negative, highlighting cash flow management challenges.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
4.18B	4.17B	4.28B	4.20B	3.41B	2.82B
	Gross Profit
2.16B	2.41B	2.06B	2.52B	2.37B	2.16B
	EBIT
1.42B	1.36B	1.07B	920.98M	905.00M	824.10M
	EBITDA
2.18B	2.10B	1.74B	1.49B	1.38B	1.26B
	Net Income Common Stockholders
1.08B	1.04B	885.32M	774.40M	665.56M	601.44M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
231.15M	307.34M	15.40M	51.55M	116.72M	20.81M
	Total Assets
6.75B	25.19B	22.52B	22.19B	19.61B	15.36B
	Total Debt
2.17B	8.13B	7.04B	8.15B	7.33B	4.53B
	Net Debt
1.94B	7.82B	7.02B	8.10B	7.21B	4.51B
	Total Liabilities
4.41B	13.04B	11.65B	12.77B	11.70B	8.57B
	Stockholders Equity
2.34B	12.16B	10.87B	9.42B	7.91B	6.79B
Cash Flow		Free Cash Flow
-1.29B	-1.20B	653.77M	-1.47B	-3.05B	-897.68M
	Operating Cash Flow
1.77B	1.73B	3.46B	977.58M	-1.08B	1.04B
	Investing Cash Flow
-3.05B	-2.92B	-2.80B	-2.43B	-1.96B	-1.93B
	Financing Cash Flow
1.58B	1.48B	-696.77M	1.39B	3.14B	883.78M

Atmos Energy Technical Analysis

Technical Analysis Sentiment

Positive

Last Price157.54

Price Trends

50DMA

149.55

Positive

100DMA

145.42

Positive

200DMA

138.53

Positive

Market Momentum

MACD

1.65

Negative

RSI

64.53

Neutral

STOCH

91.08

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ATO, the sentiment is Positive. The current price of 157.54 is above the 20-day moving average (MA) of 151.73, above the 50-day MA of 149.55, and above the 200-day MA of 138.53, indicating a bullish trend. The MACD of 1.65 indicates Negative momentum. The RSI at 64.53 is Neutral, neither overbought nor oversold. The STOCH value of 91.08 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ATO.

Atmos Energy Risk Analysis

Atmos Energy disclosed 23 risk factors in its most recent earnings report. Atmos Energy reported the most risks in the “Macro & Political” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Atmos Energy Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ATO	77 Outperform	$25.01B	22.53	9.00%	2.13%	5.90%	11.85%
UGI	76 Outperform	$7.12B	12.89	12.22%	4.52%	-14.01%	―
SR	75 Outperform	$4.53B	18.81	7.76%	3.97%	-3.96%	11.40%
NI	71 Outperform	$18.33B	24.06	8.95%	2.74%	-0.91%	2.11%
NJR	66 Neutral	$4.98B	14.97	15.15%	3.56%	9.18%	36.67%
SWX	63 Neutral	$5.26B	26.54	5.84%	3.38%	-5.92%	29.47%
Sector *	63 Neutral	$9.19B	11.97	6.86%	4.40%	4.23%	-11.24%

* Utilities Sector Average

Performance Comparison

ATO

Atmos Energy

157.54

43.22

37.81%

Spire

77.60

19.41

33.36%

NJR

New Jersey Resources

49.74

8.00

19.17%

Nisource

39.29

12.61

47.26%

SWX

Southwest Gas

73.61

2.52

3.54%

UGI

33.15

8.84

36.36%

Atmos Energy Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: 11.27% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Positive

Atmos Energy reported strong customer and revenue growth, high customer satisfaction, and significant capital investments, supported by successful regulatory filings and a solid financial position. However, increased operating expenses, potential impacts from tariffs, and Moody's negative rating outlook pose challenges.

Highlights

Strong Customer and Revenue Growth

Added over 59,000 new customers in the last twelve months, primarily in Texas, and achieved a first-quarter net income of $352 million, or $2.23 per diluted share.

High Customer Satisfaction

Atmos Energy ranked number one in customer satisfaction among mid-sized gas utilities in the Midwest by JD Power for the third consecutive year, with satisfaction ratings at 98%.

Significant Capital Investments

Invested $891 million in the first fiscal quarter for system modernization and growth, with plans for $3.7 billion in capital spending for fiscal 2025.

Successful Regulatory Filings

Implemented $152 million in annualized operating income increases in the distribution segment with several rate cases filed for additional income.

Solid Financial Position

Completed over $1 billion of long-term debt and equity financing, with a debt-to-equity ratio of 60% and $5.2 billion in available liquidity.

Lowlights

Increased Operating Expenses

Consolidated O&M expenses rose by $41 million, driven by increased employee-related costs and compliance and safety-related spending.

Equity Issuance and Rating Outlook

Moody's placed Atmos Energy on a negative outlook, and the company is planning significant equity issuances, which may affect financial strategies.

Supply Chain and Tariff Concerns

Potential impact from tariffs on Chinese and Mexican imports, though currently on pause, may affect O&M and CapEx costs.

Company Guidance

During the first-quarter earnings call for fiscal year 2025, Atmos Energy reported a net income of $352 million, translating to $2.23 per diluted share. The company's capital spending for the quarter reached $891 million, supporting system modernization and growth. Atmos added over 59,000 new customers, with 46,000 of them in Texas, contributing to the state's job growth of 284,000 jobs in 2024. The company connected nearly 1,100 commercial customers and 11 industrial customers, anticipating an annual usage of 2.3 billion cubic feet of gas. Atmos completed several projects enhancing system safety and reliability, including pipeline interconnects. Customer satisfaction ratings remained high at 98%, and the company helped over 16,000 customers secure $4 million in funding assistance. Atmos's fiscal 2025 first-quarter diluted earnings per share increased by 7.2% to $0.23, with operating income up by 15% to $459 million. They have implemented $152 million in annualized operating income increases in their distribution segment and completed over $1 billion in long-term debt equity financing. The company remains on track to achieve its fiscal 2025 earnings guidance range of $7.05 to $7.25 per share and plans to maintain a capital spending plan of $3.7 billion.

Atmos Energy Corporate Events

Executive/Board Changes

Atmos Energy Announces Leadership Transition and Appointment

Neutral

Dec 5, 2024

Atmos Energy Corporation has announced the retirement of Karen E. Hartsfield, who will transition to a Senior Advisor role before retiring in late 2025. Jessica Bateman Pulliam will succeed her as Senior Vice President, General Counsel, and Corporate Secretary from January 2025. Pulliam, known for her leadership and strategic advice, joins from Baker Botts L.L.P., bringing over two decades of legal expertise to Atmos Energy’s executive team.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.