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Atmos Energy (ATO) to Gain from Investment, Customer Addition

We recently updated a research report on Atmos Energy Corporation ATO. This natural gas utility has a well chalked-out capital expenditure plan in place. In addition, increasing customer volume is generating a positive impact on demand.

What’s Driving the Stock?

Atmos Energy invested $6 billion for replacing the aging infrastructure and modernizing the system. Its long-term capital expenditure plan calls for investment in the tune of $9-$10 billion over the next five years, out of which 80% will be spent on safety and improving the reliability of its operations. These planned investments are expected to result in annual earnings growth of 6-8% through 2023.

More than 85% of Atmos Energy’s annual capital investments start earning returns within six months and nearly 99% in no more than 12 months. Owing to positive regulatory outcome, $80.1 million increase in rates has already been implemented in fiscal 2018, $22.8 million in fiscal 2019 and nearly $13.7 million rate cases are in progress for implementation this fiscal year.

The company is benefiting from improving economy, as its customer base is expanding, which is in turn positively impacting the performance of the company. Courtesy of the improving economic conditions, the company recorded a 1.1% increase in customer volume at the end of fiscal 2018 from the 2016 level.

As Atmos Energy is concentrated in the State of Texas, its operations and financial results are vulnerable to the state’s economic conditions, weather patterns and regulatory decisions. More than 50% of the company’s distribution customers, along with most of its pipeline and storage assets as well as operations are located in the State of Texas.

Price Movement

In the past 12 months, Atmos Energy’s shares have returned 1.3%, outperforming its industry’s growth of 0.2%.


Zacks Rank & Key Picks

Atmos Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the same sector are One Gas Inc. OGS, Ameren Corp. AEE and Entergy Corp. ETR, each carrying a Zacks Rank #2 (Buy).

Third-quarter earnings of One Gas, Ameren and Entergy surpassed the Zacks Consensus Estimate by 10.71%, 17.19% and 33.2%, respectively.

One Gas, Ameren and Entergy’s Zacks Consensus Estimate for 2018 earnings has moved up 0.3%, 3.1% and 5.1%, respectively, in the past 30 days.

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