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Why Is Atmos (ATO) Up 2.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Atmos Energy (ATO - Free Report) . Shares have added about 2.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Atmos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Atmos Energy Q4 Earnings Beat, Revenues Lag Estimates

Atmos Energy Corporation posted fourth-quarter fiscal 2018 earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 37 cents by 10.8%. Earnings also surpassed the prior-year earnings by 20.6%.

Total Revenues

The company generated total revenues of $445 million, which lagged the Zacks Consensus Estimate of $642 million by 30.8%. The top line also lagged the prior-year revenues of $465 million by 4.3%.

Segment Revenues

Distribution: Revenues at the segment decreased 6.9% year over year to $407.5 million in the reported quarter from $437.9 million in the prior-year quarter. Distribution contribution margin decreased $5.4 million to $269.3 million from $274.7 million in the prior-year quarter. The decline in margin was due to a decrease of $12.6 million as a result of incorporating the lower statutory tax rate, which was reflected in its revenues due to the Tax Cut and Jobs Act (TCJA).

Pipeline and Storage: Revenues at the segment increased 12.6% to $132.7 million from $117.8 million in the year-ago quarter. Contribution margin increased $15.0 million to $132.6 million from $117.6 million in the prior-year quarter. This improvement is attributable to an increase in rates.

Inter-segment elimination had an impact of $95.4 million in the reported quarter compared with $90.9 million in the year-ago quarter.

Highlights of the Release

Total operating expenses in the reported quarter increased 4% to $312 million from the year-ago quarter due to increase in operation and maintenance expenses, depreciation and amortization costs, as well as taxes (excluding income expenditures).

Operating income in the reported quarter was down 2.4% year over year to $89.5 million. The decrease primarily reflects the lower statutory tax rate in revenues due to the TCJA and higher operating expenses in the reported quarter.

The company incurred interest expenses of $24.5 million, down 27.3% from the year-ago period.

Capital expenditures in the fiscal year were $1.47 billion, of which nearly 85% was related to system safety and reliability investments.

Financial Highlights

As of Sep 30, 2018, Atmos Energy had cash and cash equivalents of $13.7 million compared with $26.4 million on Sep 30, 2017.

Its long-term debt was $2.49 billion as of Sep 30, 2018, down from $3.07 billion on Sep 30, 2017.

The company’s cash flow from operating activities in fiscal 2018 was $1.13 billion, up from $0.87 billion recorded in the prior fiscal year.

Guidance

Atmos Energy expects its fiscal 2019 earnings in the range of $4.20-$4.35 per diluted share. Capital expenditures are expected in the range of $1.65-$1.75 billion in fiscal 2019.
 

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, Atmos has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Atmos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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