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Atmos Energy Corp. (ATO)
NYSE:ATO
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Atmos Energy
(NYSE:ATO)
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Rating:65Neutral
Price Target:
$181.00
▲(7.22% Upside)
The score is driven primarily by strong profitability but tempered by sustained negative free cash flow and reliance on funding to support heavy capital needs. Earnings-call factors are supportive due to reaffirmed guidance, dividend plan, and solid liquidity, while technical indicators are neutral and valuation appears fair-to-slightly expensive for the profile.
Positive Factors
Regulated revenue model
A regulated rate-setting model provides durable cash flow visibility and cost recovery mechanisms that support predictable revenue and returns. Over 2–6 months this underpins credit stability, capital planning and the ability to fund safety/reliability capex without relying solely on volatile commodity markets.
Strong profitability and margins
Sustained ~25% net margins reflect durable earnings power in the regulated segments. This margin buffer supports dividend capacity and internal funding for projects over the medium term, providing resilience versus modest top-line growth typical of utilities.
Robust liquidity and financing execution
Demonstrated access to capital and $4.6B liquidity reduce near-term refinancing risk and support the $4.2B FY26 capex plan. Strong financing execution and balanced capitalization provide structural flexibility to fund growth, safety projects and dividend commitments over coming quarters.
Negative Factors
Consistently negative free cash flow
Persistent negative FCF driven by heavy capex means the company must rely on external financing or equity transactions to fund its capital program. Over 2–6 months this elevates funding risk if market conditions tighten or rates rise, pressuring financial flexibility and cushion for unexpected shocks.
Regulatory uncertainty in key jurisdictions
Ongoing rate-case and legislative timing uncertainty can delay or reduce cost recovery and allowed returns. Over the medium term this creates earnings and cash-flow timing risk, complicates capital recovery assumptions, and could require more frequent filings or regulatory remedies to maintain returns.
Rising operating & maintenance costs
Higher O&M driven by compliance, leak surveys and labor raises structural operating expense levels. If regulators do not fully and timely allow recovery, persistent O&M inflation can compress margins and slow EPS/dividend growth over the next several quarters despite stable rate frameworks.
Atmos Energy (ATO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$28.43B
Dividend Yield2.15%
Average Volume (3M)1.20M
Price to Earnings (P/E)22.0
Beta (1Y)0.14
Revenue Growth12.91%
EPS Growth9.86%
CountryUS
Employees5,260
SectorUtilities
Sector Strength65
IndustryRegulated Gas
Share Statistics
EPS (TTM)2.44
Shares Outstanding161,748,000
10 Day Avg. Volume2,202,874
30 Day Avg. Volume1,196,157
Financial Highlights & Ratios
PEG Ratio2.18
Price to Book (P/B)2.00
Price to Sales (P/S)5.77
P/FCF Ratio-17.95
Enterprise Value/Market Cap1.30
Enterprise Value/Revenue7.58
Enterprise Value/Gross Profit21.35
Enterprise Value/Ebitda15.05
Forecast
1Y Price Target
$176.67Price Target Upside4.66% Upside
Rating ConsensusHold
Number of Analyst Covering6
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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 the sale and distribution of natural gas to its customers. The company's revenue model is based on regulated rates set by state public utility commissions, which allow it to recover costs and earn a return on investment. Key revenue streams include residential and commercial gas sales, transportation fees for moving gas through its distribution network, and storage services. Additionally, Atmos Energy may benefit from partnerships with local governments and other agencies for infrastructure projects and energy efficiency programs, which can also enhance its earnings. Factors such as regulatory approvals, market demand for natural gas, and investments in infrastructure improvements significantly influence the company's financial performance.
Atmos Energy Earnings Call Summary
Earnings Call Date:Feb 03, 2026
(Q1-2026)
| Next Earnings Date:May 13, 2026
Earnings Call Sentiment Positive
The call presented a predominantly positive operational and financial picture: year-over-year EPS growth (+9.4%), strong customer additions, major pipeline and storage capacity upgrades, robust liquidity and financing execution, and on-track guidance/capex program. Offsetting items include rising O&M costs (+$23M), some short-term volume impacts from maintenance (~2 Bcf at APT), timing uncertainty around the deferral benefits from Texas House Bill 4384, and localized regulatory uncertainty (Mississippi). Overall, the positives (growth, project progress, liquidity, guidance) outweigh the manageable operational and regulatory headwinds.Q1-2026 Updates
Positive Updates
Strong Quarterly Earnings and EPS Growth
Reported fiscal Q1 net income of $403 million, or $2.44 per diluted share, representing a 9.4% increase in diluted EPS versus the prior year quarter.
Capital Investment Focused on Safety and Reliability
First quarter capital expenditures of $1.0 billion with over 85% of investments focused on enhancing safety and reliability across distribution, transmission and underground storage systems; company remains on track for fiscal '26 capital plan of $4.2 billion.
Rebased FY2026 Guidance and Dividend Plan
Rebased fiscal 2026 EPS guidance to $8.15–$8.35 and rebased the annual dividend to $4.00 per share, with a plan to grow the dividend in line with EPS growth of 6%–8% annually.
Atmos Pipeline-Texas Project Milestones
Completed ~55 miles of 36-inch pipeline from Bethel to Groesbeck, placed 13 miles of Line WA Loop into service (remaining ~31 miles expected this spring), more than doubled takeaway capacity at Bethel Salt Dome, and completed 2 interconnects adding ~700,000 Mcf/day of supply optionality.
Customer Growth and High Satisfaction
Added nearly 54,000 net new customers for the 12 months ending Dec 31, 2025 (approximately 42,000 in Texas); in Q1 added ~1,100 commercial and 3 industrial customers. Achieved customer satisfaction ratings of 98% for the quarter and received J.D. Power and Escalent regional customer service recognitions.
Rate Increases and Operating Income Drivers
Implemented rate increases that totaled $68 million and realized an additional $24 million operating income from residential/commercial customer growth and increased load; APT through-system revenues (net of Rider REV) increased by about $7 million.
Improved Commodity Spreads
APT spreads widened materially to an average of $3.99 in the quarter versus $1.56 in the prior year quarter, contributing to stronger margin performance on throughput (average spread increase of ~155% year-over-year).
Strong Liquidity and Capital Positioning
Completed over $1 billion of long-term debt/equity financing in the quarter (including $600 million long-term debt in Oct 2025), settled $472 million of equity forward agreements, reported equity capitalization of 60%, no short-term debt, and $4.6 billion of available liquidity (including ~$1.1 billion net proceeds under forward sale agreements).
Negative Updates
Higher O&M Costs
Consolidated operating & maintenance expense increased by $23 million in the quarter, including a $12 million increase in compliance and safety-related spending (more leak survey work and maintenance timing) and approximately $5 million of higher employee-related costs (increased headcount, overtime and standby).
Through-System Volume Decline at APT
APT's through-system volumes declined by approximately 2 Bcf in the quarter due to increased maintenance activity compared with the prior year quarter, partially offset by wider spreads.
Timing Uncertainty Around HB 4384 Benefits
Recorded $35 million of benefit ($0.16 per share) in Q1 related to Texas House Bill 4384, but management cautioned against annualizing the quarter's benefit due to sensitivity to the timing of spending, project closings and operational activity, creating uncertainty around run-rate impact.
Regulatory and Rate Case Uncertainty in Mississippi
Adverse outcome in a Mississippi rate case prompted a filed intent to appeal to the State Supreme Court; while Mississippi represents ~5% of the business, the decision has prompted tariff filings, potential deferrals and evaluation of annual filing mechanics (historical vs forward test year) which add regulatory uncertainty.
CapEx Scheduling Impacted by Winter Operations
Winter Storm Fern diverted operational focus to winter operations and reduced construction activity in the near term, affecting the timing of capital deployment and the related deferral mechanics tied to HB 4384.
Affordability and Regulatory Scrutiny Remain Considerations
Management acknowledged ongoing affordability concerns and continued engagement with regulators; while no immediate regulatory pushback was reported, affordability remains a topic under scrutiny that could influence future regulatory outcomes.
Company Guidance
Management reaffirmed rebased fiscal 2026 guidance of $8.15–$8.35 EPS and a rebased annual dividend of $4.00 (targeting dividend growth in line with EPS growth of 6–8% annually); the company said it is on track to achieve that guidance and its $4.2 billion FY26 capital plan. In Q1 Atmos reported net income of $403 million, or $2.44 diluted EPS (up 9.4% YoY), with Q1 capex of $1.0 billion (over 85% on safety/reliability) and a $35 million ($0.16) benefit from Texas HB 4384 ($20M Distribution, $15M APT). Other notable metrics: implemented $123 million of annualized distribution OI increases, five filings seeking ~$81 million more and an additional planned filing for ~ $400 million annualized; APT through-system revenue net of Rider REV rose ≈$7M while volumes declined ~2 Bcf and spreads averaged $3.99 vs $1.56 LY; completed >$1B of long-term financing (including $600M debt in Oct‑2025), settled $472M in equity forwards, equity capitalization 60%, and $4.6B available liquidity (including ≈$1.1B net forward sale proceeds to cover FY26/FY27 equity needs).Atmos Energy Financial Statement Overview
Summary
Profitability is strong and improving (TTM net margin ~25%, net income up to ~$1.25B TTM), and leverage appears manageable for a regulated utility (debt-to-equity ~0.65–0.86, ROE ~8–9%). The key drag is cash generation: free cash flow is consistently negative (TTM about -$1.6B) and cash flow has been volatile, implying ongoing external funding needs to support capital spending.Income Statement
Profitability is strong for a regulated utility profile, with TTM (Trailing-Twelve-Months) net margin around 25% and solid operating and EBITDA margins. Earnings have expanded versus prior years (net income rising from ~$665M in 2021 to ~$1.25B in TTM), showing improving scale and execution. The main offset is modest top-line momentum (TTM revenue growth ~3.5% and low growth in the latest annual period), consistent with a slower-growth regulated business.78
Positive
Balance Sheet
Leverage looks manageable for the sector, with debt-to-equity generally in the ~0.65–0.86 range over the period, and returns on equity steady around ~8–9%, indicating consistent but not high capital efficiency. Balance sheet size has grown steadily alongside equity and assets, supporting a stable base. Key watchout is that the company is still meaningfully debt-funded (typical for utilities), which can pressure flexibility if funding costs rise or capital spending remains elevated.67
Positive
Cash Flow
Operating cash generation is currently healthy (TTM operating cash flow ~$2.1B) and supports earnings quality, with operating cash flow running about 1.5x net income in TTM (Trailing-Twelve-Months). However, free cash flow is consistently negative in recent periods (TTM about -$1.6B and also negative in 2024 and 2025 annual), indicating heavy investment and/or funding needs. Cash flow has also been volatile historically (including a negative operating cash flow year in 2021), which lowers confidence despite the recent improvement.52
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.70B | 4.17B | 4.28B | 4.20B | 3.41B |
| Gross Profit | 2.46B | 2.41B | 2.06B | 1.81B | 1.70B |
| EBITDA | 2.38B | 2.10B | 1.74B | 1.49B | 1.38B |
| Net Income | 1.20B | 1.04B | 885.32M | 774.40M | 665.56M |
Balance Sheet | |||||
| Total Assets | 28.91B | 25.19B | 22.52B | 22.19B | 19.61B |
| Cash, Cash Equivalents and Short-Term Investments | 203.80M | 307.34M | 15.40M | 51.55M | 116.72M |
| Total Debt | 9.30B | 8.13B | 7.12B | 8.37B | 7.56B |
| Total Liabilities | 15.35B | 13.04B | 11.65B | 12.77B | 11.70B |
| Stockholders Equity | 13.56B | 12.16B | 10.87B | 9.42B | 7.91B |
Cash Flow | |||||
| Free Cash Flow | -1.51B | -1.20B | 653.77M | -1.47B | -3.05B |
| Operating Cash Flow | 2.05B | 1.73B | 3.46B | 977.58M | -1.08B |
| Investing Cash Flow | -3.56B | -2.92B | -2.80B | -2.43B | -1.96B |
| Financing Cash Flow | 1.41B | 1.48B | -696.77M | 1.39B | 3.14B |
Atmos Energy Technical Analysis
Positive
168.81
Price Trends
168.91
Positive
170.30
Positive
163.38
Positive
Market Momentum
-0.08
Negative
60.67
Neutral
67.93
Neutral
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 168.81 is above the 20-day moving average (MA) of 167.78, below the 50-day MA of 168.91, and above the 200-day MA of 163.38, indicating a bullish trend. The MACD of -0.08 indicates Negative momentum. The RSI at 60.67 is Neutral, neither overbought nor oversold. The STOCH value of 67.93 is Neutral, 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 22 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
UnderperformOutperform
Sector (66)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $5.96B | 12.93 | 5.42% | 3.07% | -23.15% | 157.45% | |
70 Outperform | $8.68B | 12.93 | 14.87% | 3.92% | 1.10% | 140.04% | |
67 Neutral | $4.89B | 18.77 | 8.51% | 3.45% | 15.06% | 12.27% | |
66 Neutral | $5.23B | 16.02 | ― | 4.01% | 13.94% | 13.93% | |
66 Neutral | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% | |
65 Neutral | $28.43B | 21.97 | 9.32% | 2.15% | 12.91% | 9.86% | |
64 Neutral | $21.01B | 23.22 | 10.23% | 2.69% | 19.62% | 12.87% |
* Utilities Sector Average
ATO
Atmos Energy
171.83
29.97
21.12%
NJR
New Jersey Resources
51.87
6.74
14.93%
NI
Nisource
44.03
6.94
18.72%
SWX
Southwest Gas
82.63
7.90
10.57%
UGI
UGI
40.39
10.32
34.31%
OGS
ONE Gas
81.48
12.95
18.90%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.