The Utility sector comprises electric, natural gas and water companies and is considered one of the most stable sector for investment. This sector deals with the basic services and most Utility companies are mature, fundamentally strong as well as regulated.
The Zacks Utility Gas Distribution companies offer services to transport natural gas from the region of production to end users. Demand for such services is growing across the United States on the back of increasing consumption of the clean-burning natural gas.
Per the U.S. Energy Information Administration (“EIA”) release, total U.S. natural gas consumption will increase 1.3% year over year in 2019 and 1.1% in 2020 to a total of 83.6 billion cubic feet/day (Bcf/d).
In this write up, we run a comparative analysis on two Utility - Gas Distribution companies — ONEOK, Inc. (OKE - Free Report) and Atmos Energy Corp. (ATO - Free Report) — to figure which one is a better option for investment before earnings.
ONEOK, carrying a Zacks Rank #3 (Hold), has a market capitalization of around $25.99 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atmos Energy, holding a Zacks Rank #3, has a market capitalization of $10.63 billion.
Earnings Surprise History
ONEOK outpaced the Zacks Consensus Estimate in each of the trailing four quarters with an average of 3.08%. Meanwhile, Atmos Energy delivered positive earnings surprises in three of the trailing four quarters with an average of 7.42%. ONEOK has an edge with consistent performance.
Long-Term Growth Expectations
In terms of long-term earnings growth expectations, ONEOK scores more than Atmos Energy. The expected earnings per share growth rate for ONEOK for the next five years is pegged at 9.50% compared with Atmos Energy’s 6.50%.
In the past month, shares of ONEOK and Atmos Energy have gained 23.2% and 6.6%, respectively. The industry recorded a gain of 9.9% over the same period.
Debt-to-capital is a good indicator of the financial position of a company and shows how much debt is used to run the business. ONEOK has a debt-to-capital of 55.58% compared with the industry’s average of 49.92%. With a lower debt-to-capital of 34.33%, Atmos Energy wins this round.
Utility Companies generally distribute dividends. Currently, dividend yield for ONEOK is at 5.41%, higher than 2.20% of Atmos Energy. ONEOK’s dividend yield is higher than the industry’s 2.66% and the company wins here.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-months for ONEOK and Atmos Energy is 16.32% and 9.44%, respectively. While ONEOK has scored above the industry’s level of 10.01%, Atmos Energy lagged the same.
The companies are providing quality services to customers. Our comparative analysis shows that ONEOK has an edge over Atmos Energy in terms of earnings surprise history, long-term growth expectations, ROE measures, dividend yield and price performances.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>