Reasons to Add Atmos Energy (ATO) to Your Portfolio Right Now
Atmos Energy Corporation’s ATO systematic investment plans will further increase the safety and reliability of its natural gas pipelines, distribution and transportation systems, and drive its performance. Given its growth opportunities, the company makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for fiscal 2024 earnings per share (EPS) has increased 0.9% to $6.52 in the past 60 days.
The Zacks Consensus Estimate for fiscal 2024 sales indicates a year-over-year increase of 23.4%.
The company’s long-term (three- to five-year) earnings growth rate is 7.25%. It delivered an average earnings surprise of 1.1% in the last four quarters.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate returns. Currently, Atmos Energy’s ROE is 8.54%, higher than the sector’s average of 7.34%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility sector.
Debt Position
Currently, ATO’s total debt to capital is 37.96%, much better than the industry’s average of 49.67%.
The time to interest earned ratio at the end of fourth-quarter fiscal 2023 was 8.3. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.
Dividend History
Atmos Energy has been increasing its annual dividend for 40 consecutive years. In November 2023, its board of directors declared a quarterly dividend of 80.5 cents per share. The new dividend for fiscal 2024 is $3.22 per share, indicating an 8.8% increase from the prior-year level.
The company aims to increase its dividend in the range of 6-8% per year through fiscal 2026, subject to the approval of the board of directors. Atmos Energy’s current dividend yield is 2.83%, better than the Zacks S&P 500 Composite’s 1.41%.
Systematic Investments
ATO’s long-term capital expenditure plan will further strengthen its infrastructure and operations. After investing $2.45 billion in fiscal 2022, the company invested $2.8 billion in fiscal 2023, 85% of which was allocated to safety and reliability. The company expects $2.9 billion in capital expenditures during fiscal 2024.
Price Performance
Atmos Energy’s shares have risen 1.5% year to date against the industry’s average 10.3% decline.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same sector are NewJersey Resources NJR, Sempra Energy SRE and PPL Corporation PPL, each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NJR’s long-term earnings growth rate is 6%. It delivered an average earnings surprise of 118.6% in the last four quarters.
SRE’s long-term earnings growth rate is 4.95%. The company delivered an average earnings surprise of 9% in the last four quarters.
PPL’s long-term earnings growth rate is 7.42%. The consensus estimate for the company’s 2023 EPS is pegged at $1.58, indicating a year-over-year improvement of 12.1%.
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PPL Corporation (PPL) : Free Stock Analysis Report
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Atmos Energy Corporation (ATO) : Free Stock Analysis Report
NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
