Atmos Energy’s (ATO - Free Report) earnings estimates have been revised upward over the past 60 days, reflecting analysts’ optimism surrounding the stock. The Zacks Consensus Estimate for third-quarter fiscal 2020 earnings has moved up 1.3% during the said period.
Atmos Energy and its subsidiaries are engaged in engaged in regulated natural gas distribution and storage business. The company surpassed earnings estimates in the last reported quarter by 0.5%.
Let’s focus on the factors that make Atmos Energy a good investment option at the moment.
Return on Equity (ROE)
Atmos Energy’s ROE of 9.35% compared with the industry average of 8.89% indicates that it is more efficient in utilizing shareholders’ funds than industry peers.
During fiscal 2015 to 2019, the company invested $6.4 billion in replacing aging infrastructure and modernizing the system. In fiscal 2020, it intends to invest $1,850-$1,950 million to strengthen infrastructure. Out of the total, 85% will be spent on maintaining the safety and reliability of its services.
More than 90% of Atmos Energy’s annual capital investments start generating returns within six months and nearly 99% in no more than 12 months. Customers and investors gain from the constructive rate outcomes. Owing to positive regulatory outcome, $115.2 million and $58.2 million increase in rates has been implemented in fiscal 2019 and 2020 (till May 6), respectively. In addition, nearly $215.8 million rate cases are in progress for implementation this fiscal year.
In the past 24 months, Atmos Energy’s shares have gained 12.5% against the industry’s decline of 12.4%.
Long-Term Growth and Dividend Yield
The company’s long-term (three to five years) earnings growth is projected at 7.2% courtesy of well chalked-out capital investment plans, regular rate revisions and strong contribution from its residential customers.
Its current dividend yield is 2.31% higher than the Zacks S&P 500 composite’s average of 2.09%.
Earnings Estimate Revision
The Zacks Consensus Estimate for fiscal 2020 earnings has remained unchanged at $4.69 per share for the past 90 days, while fiscal 2021 bottom-line estimates have moved up 0.2% to $5.03 in the same time frame.
Zacks Rank & Other Key Picks
Atmos Energy currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks from the same sector include Sempra Energy (SRE - Free Report) , Vistra Energy Corp. (VST - Free Report) and NewJersey Resources Corporation (NJR - Free Report) , each holding a Zacks Rank of 2.
Long-term earnings growth of Sempra Energy, Vistra Energy and NewJersey Resources is projected at 6.9%, 11.9% and 6%, respectively.
The Zacks Consensus Estimate for 2020 earnings for Sempra Energy, Vistra Energy and NewJersey Resources has moved up 1%, 8.5% and 0.4%, respectively, in the past 60 days.
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