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Atmos (ATO) Down 1.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Atmos Energy (ATO). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Atmos due for a breakout? 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 catalysts.

Atmos Energy Q4 Earnings Beat Estimates by a Penny

Atmos Energy Corporation posted fourth-quarter fiscal 2019 earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents by 2.1%.

The reported earnings also improved 19.5% from the prior-year figure. The year-over-year improvement in earnings was due to positive rate outcomes, and higher margins in its pipeline and storage segment.

Total Revenues

Total revenues of $443.7 million lagged the Zacks Consensus Estimate of $578 million by 23.2%. Moreover, the figure was marginally lower than the year-ago total revenues of $444.7 million by 0.2%. The year-over-year decline in revenues was due to lower contribution from the distribution segment.

Segment Revenues

Distribution: Revenues from the segment decreased 0.9% to $403.8 million from $407.5 million in the prior-year quarter.

Pipeline and Storage: Revenues from the segment increased 11.3% to $147.7 million from $132.7 million in the year-ago quarter. The improvement was driven by increase in rates, wider spreads, and positive supply and demand dynamics in the Permian Basin.

Quarterly Highlights

Total operating expenses in the reported quarter increased 9.5% from the year-ago level to $340.3 million due to higher operation and maintenance expenses, as well as depreciation and amortization costs.

Operating income in the reported quarter was down 1.1% year over year to $89.7 million due to higher operating expenses. Higher contribution from distribution and pipeline, and storage segments was more than offset by increased operation and maintenance, and depreciation expenses in the quarter.

The company incurred interest expenses of $28.8 million, up 17.6% from the year-ago period.

Financial Highlights

As of Sep 30, 2019, Atmos Energy had cash and cash equivalents of $24.5 million compared with $13.8 million in the corresponding period of 2018.

Long-term debt was $3.53 billion as of Sep 30, 2019, up from $2.49 billion in the comparable year-ago period.

The company’s cash flow from operating activities in fiscal 2019 was $968.8 million, down from $1,124.6 million recorded a year ago.

It invested $1.69 billion in fiscal 2019 compared with $15 billion in fiscal 2018. The increase in capital spending was due to continued spending for infrastructure replacements and enhancements.

Guidance

Atmos Energy expects fiscal 2020 earnings in the range of $4.58-$4.73 per share. The Zacks Consensus Estimate for fiscal 2020 is $4.63 per share. Capital expenditure is expected in the range of $1.85-$1.95 billion for fiscal 2020.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted 9.06% due to these changes.

VGM Scores

At this time, Atmos has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Atmos has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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