Atmos (ATO) Up 2.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Atmos Energy (ATO). Shares have added about 2.9% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Atmos Energy Q4 Earnings Beat Estimates, Revenues Fall Y/Y
Atmos Energy Corporation posted fiscal fourth-quarter 2023 earnings of 80 cents per share, which surpassed the Zacks Consensus Estimate of 74 cents by 8.1%. The bottom line improved 56.9% from the year-ago quarter’s 51 cents.
The year-over-year increase in earnings was due to rate-case outcomes in both Distribution and Pipeline and Storage segments, and customer growth in the Distribution segment. This was partially offset by higher depreciation and property tax expenses owing to increased capital investments.
Revenues
Total revenues of $587.6 million lagged the Zacks Consensus Estimate of $923 million by 36.3%. The top line also decreased 18.7% from the year-ago quarter’s reported number of $723 million.
Segmental Revenues
Distribution: Revenues in fourth-quarter fiscal 2023 totaled $542.9 million, indicating a 20% decline from $678.9 million in the year-ago quarter.
Pipeline and Storage: Revenues amounted to $205.9 million, implying a 12.1% increase from $183.4 million a year ago.
Highlights of the Release
Operation and maintenance expenses amounted to $190.1 million, down 7.5% from the year-ago quarter’s level.
Operating income totaled $154.1 million in the reported quarter, up 46.2% from the year-ago quarter’s level.
Atmos Energy incurred interest expenses of $31.8 million, up 14.4% year over year.
The company reported 65.9 million cubic feet (“MMcf”) of consolidated distribution throughput for the quarter, down 3.4% from the year-ago quarter’s actual.
Consolidated pipeline and storage transportation volumes came in at 195.5 MMcf, up 15.9% year over year.
ATO Energy increased its quarterly dividend by 8.8% to 80.5 cents, taking the new annualized rate to $3.22 per share.
Financial Highlights
As of Sep 30, 2023, Atmos Energy reported a strong balance sheet with available liquidity of approximately $2.7 billion.
As of Sep 30, 2023, ATO had cash and cash equivalents of $15.4 million compared with $51.6 million as of Sep 30, 2022.
As of Sep 30, 2023, long-term debt was $6,554.1 million compared with $5,760.6 million as of Sep 30, 2022.
Net cash flow provided by operating activities in fiscal 2023 was $3,459.7 million compared with $977.6 million in the year-ago period.
Capital expenditures amounted to $2.8 billion for fiscal 2023, with nearly 85% of the amount being related to system safety and reliability investments.
Guidance
Atmos Energy provided fiscal 2024 earnings guidance in the range of $6.45-$6.65 per share. The Zacks Consensus Estimate for the same is pegged at $6.46 per share, lower than $6.56, the midpoint of the guided range.
ATO expects to invest $17 billion in the fiscal 2024-2028 period.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months.
VGM Scores
At this time, Atmos has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.
Performance of an Industry Player
Atmos belongs to the Zacks Utility - Gas Distribution industry. Another stock from the same industry, Sempra (SRE), has gained 5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Sempra reported revenues of $3.33 billion in the last reported quarter, representing a year-over-year change of -7.8%. EPS of $1.08 for the same period compares with $0.99 a year ago.
Sempra is expected to post earnings of $1.13 per share for the current quarter, representing a year-over-year change of -4.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.6%.
Sempra has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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