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Atmos (ATO) Up 3.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Atmos Energy (ATO - Free Report) . Shares have added about 3.8% 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 catalysts.

Atmos Energy Q1 Earnings Beat Estimates, Revenues Miss

Atmos Energy Corporation posted first-quarter fiscal 2019 earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of $1.33 by 3.8%. However, the reported earnings declined 1.4% from the prior-year figure.

Total Revenues

Total revenues of $877.8 million lagged the Zacks Consensus Estimate of $978 million by 10.2%. The figure was also lower than the year-ago total revenues of $889.2 million by 1.3%. The year-over-year decline in revenues was due to lower contribution from its distribution segment.

Segment Revenues

Distribution: Revenues from the segment decreased 2.5% from $860.8 million in the prior-year quarter to $838.9 million. Distribution contribution margin increased to $401.1 million from $397 million in the year-ago quarter, driven by increase in consumption in its Mid-Tex, Mississippi and Colorado-Kansas Divisions.

Pipeline and Storage: Revenues from the segment increased 6.3% from $126.5 million in the year-ago quarter to $134.5 million. Contribution margin rose 7.3% year over year to $134.8 million. The upside was on account of increase in rates due to the Gas Reliability Infrastructure Program (GRIP) filings approved in fiscal 2018, along with positive demand and supply dynamics in the Permian Basin.

Quarterly Highlights

Operation and Maintenance expenses in the reported quarter increased 7.4% from the year-ago quarter to $138.6 million due to higher employee costs and timing of pipeline maintenance activities.

Operating income in the reported quarter was down 2.3% year over year to $236.5 million. The decrease primarily reflects higher operating expenses and increased depreciation costs. Positive contribution margins, driven by weather, consumption, higher customer counts in the distribution segment, and volumes in its pipeline and storage segment, marginally offset the decline.

The company incurred interest expenses of $27.9 million, down 11.4% from the year-ago period.

It invested $416.4 million in the reported quarter, with 82% of the investment directed toward strengthening the existing systems and increasing the reliability of its operations.

Financial Highlights

As of Dec 31, 2018, Atmos Energy had cash and cash equivalents of $218.2 million compared with $13.8 million on Sep 30, 2018.

Long-term debt was $3.08 billion as of Dec 31, 2018, up from $2.49 billion on Sep 30, 2018.

The company’s cash flow from operating activities over the three months ended Dec 31, 2018 was $164.7 million, down from $173.2 million recorded in the prior-year comparable period.

Guidance

Atmos Energy has re-affirmed its fiscal 2019 guidance. It is well placed to come up with earnings growth in the range of 6-8% for fiscal 2019.

The company expects earnings per share in the range of $4.20-$4.35, whose mid-point of $4.275 is below the current Zacks Consensus Estimate for fiscal 2019 of $4.29.

Capital expenditure for fiscal 2019 is expected in the range of $1.65-$1.75 billion.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Atmos has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. 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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