Solid capital expenditure plan, returns within a year of investment, customer additions and positive regulatory outcomes will continue to boost Atmos Energy Corporation’s ATO performance.
Earnings estimates for the company for fiscal 2019 and fiscal 2020 are likely to rise 8.5% and 6.8% on a year-over-year basis to $4.34 and $4.63 per share, respectively. Revenue estimates for fiscal 2019 and fiscal 2020 are likely to increase 41.4% and 12% on a year-over-year basis to $3.15 billion and $3.53 billion, respectively.
Let’s focus on the factors that make Atmos Energy an appropriate investment option at the moment.
Zacks Rank & Earnings Surprise History
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.
The company’s average four-quarter positive earnings surprise is 5.36%.
Long-Term Growth & Price Movement
The company’s long-term (three to five years) earnings growth is pegged at 6.70%.
In the past 12 months, Atmos Energy’s shares have gained 18.3% compared with the industry’s rise of 6.5%.
Atmos Energy has a sturdy capital expenditure plan, which enables it to enhance safety and reliability of its natural gas pipelines. The company’s total capital expenditure in fiscal 2019 is expected in the range of $1.65-$1.75 billion. Since 2011, the company has invested $6 billion in replacing aging infrastructure and modernizing the system. Its long-term capital expenditure plans call for investment of $9-$10 billion over the next five years, of which 80% will be spent on safety and improving the reliability of operations.
Given the solid capital-expenditure plans, addition of customers and increase in consumption, we can expect that the company will maintain its annual dividend-increase policy over the long run. Consistent performance of the company has enabled it to reward its shareholders through consistent increase in annual dividend rates. On Nov 7, 2018, the board of directors of Atmos Energy approved an 8.2% increase in annual dividend, marking the 35th consecutive year of dividend hike.
Return on Investments
More than 85% of Atmos Energy’s annual capital investments start earning 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, an increase of $80.1 million and $110 million in rates had been implemented in fiscal 2018 and fiscal 2019, respectively. Nearly $87.1 million rate cases are in progress for implementation in this fiscal, which will support in the coming fiscal.
Other Key Picks
Some other top-ranked stocks from the same sector are Chesapeake Utilities Corporation CPK, The AES Corporation AES and IDACORP, Inc IDA, each holding a Zacks Rank of 2.
Long-term earnings growth of Chesapeake Utilities, AES Corporation and IDACORP is pegged at 7%, 8.49% and 3.85%, respectively.
The Zacks Consensus Estimate for 2019 earnings of Chesapeake Utilities, AES Corporation and IDACORP inched up 0.5%, 0.7% and 0.2% to $3.73, $ 1.34 and $4.47 in the past 60 days, respectively.
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