Atmos Energy Corporation’s (ATO Quick QuoteATO - Free Report) long-term investment plans should further increase the safety and reliability of its natural gas pipelines and distribution and transportation systems. Solid contributions from residential customers help boost the company’s top line. Given its growth opportunities, ATO makes for a solid investment option in the utility sector.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.

ATO’s Growth Projections & Surprise History

The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has increased 0.8% to $7.16 in the past 90 days.

The Zacks Consensus Estimate for fiscal 2025 sales is pinned at $5.04 billion, implying a year-over-year increase of 17.8%.

The company’s long-term (three to five-year) earnings growth rate is 7%. It delivered an average earnings surprise of 3.4% in the trailing four quarters.

ATO’s Solvency

Currently, ATO’s total debt to capital is 39.26%, better than the industry’s average of 49.62%. This ratio determines the proportion of a business’s total capital that is financed using debt. A lower ratio implies that the company can pay for capital without relying on debt.

ATO’s Liquidity Position

Atmos Energy’s current ratio is 1.74, better than the industry’s average of 0.56. A current ratio greater than one indicates that the company has enough short-term assets to liquidate to cover all short-term liabilities (if necessary).

ATO’s Dividend History

ATO has been increasing shareholder value via regular dividend payments. In November 2024, the company’s board declared an 8.8% increase in the annual dividend rate. Its new quarterly dividend is 87 cents per share. This resulted in an annualized dividend of $3.48 per share compared with the previous year's $3.22. This marks the company’s 164th consecutive quarterly dividend.

Atmos Energy aims to increase its dividend by 6-8% per year through fiscal 2026, subject to the approval of the board of directors. Its current dividend yield is 2.19%, better than the Zacks S&P 500 composite’s 1.19%.

ATO’s Systematic Investments

The company’s systematic capital expenditure plan toward the enhancement of the safety and reliability of its natural gas pipelines helps serve its expanding customer base more efficiently.  

ATO expects $3.7 billion in capital expenditures during fiscal 2025. It also plans to invest $24 billion during fiscal 2025-2029 to strengthen its operations. The planned investment should result in 6-8% annual earnings growth during the aforementioned period.

ATO’s Price Performance

In the past six months, Atmos Energy’s shares have risen 26.2% compared with the industry’s 15.3% growth.  

Image Source: Zacks Investment Research

Other Stocks to Consider

A few other top-ranked stocks from the same sector are ONE Gas, Inc. (OGS Quick QuoteOGS - Free Report) , New Jersey Resources (NJR Quick QuoteNJR - Free Report) and NiSource (NI Quick QuoteNI - Free Report) , each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OGS’ long-term earnings growth rate is 5%. The Zacks Consensus Estimate for fourth-quarter sales indicates an increase of 8.9% from the prior-year registered figure.  

The Zacks Consensus Estimate for NJR’s fiscal 2024 EPS indicates year-over-year growth of 10.1%. The Zacks Consensus Estimate for NJR’s fiscal 2024 sales indicates a decline of 7.9% from the previous year’s registered figure.  

NI’s long-term earnings growth rate is 6.95%. The Zacks Consensus Estimate for 2024 EPS indicates year-over-year growth of 8.1%.