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Why Is Atmos (ATO) Up 3.1% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Atmos Energy (ATO). Shares have added about 3.1% in that time frame, outperforming 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 Q2 Earnings Beat Estimates, Guidance Up

Atmos Energy Corporation posted second-quarter fiscal 2019 earnings of $1.82 per share, which surpassed the Zacks Consensus Estimate of $1.68 by 8.3%. The reported earnings also improved 15.9% from the prior-year figure. The year-over-year improvement in earnings is driven by the implementation of new rates and customer growth.

Total Revenues

Total revenues of $1,094.7 million lagged the Zacks Consensus Estimate of $1,279 million by 14.4%. Moreover, the figure was 10.2% lower than the year-ago total revenues of $1,219.4 million. The year-over-year decline in revenues was due to lower contribution from its distribution segment.

Segment Revenues

Distribution:
Revenues from the segment decreased 11.8% to $1,057.9 million from $1,199.3 million in the prior-year quarter. Distribution contribution margin increased to $487.5 million from $472.2 million in the year-ago quarter, driven by increase in customer growth in Mid-TexDivision.

Pipeline and Storage: Revenues from the segment increased 12.3% to $135.7 million from $120.9 million in the year-ago quarter.

Quarterly Highlights

Total operating expenses in the reported quarter increased 1.1% from the year-ago level to $325.3 million due to higher tax, and depreciation and amortization costs.

Operating income in the reported quarter was up 9.9% year over year to $297.7 million. The increase reflects positive rate case outcomes, customer growth, strong transportation activity in the distribution segment, along with higher volumes and margins in the pipeline and storage segment.

The company incurred interest expenses of $26.9 million, down 1.5% from the year-ago period.

It invested $777.6 million in the six months ended Mar 31, 2019. Of the total spending, nearly 84% was assigned for improving system safety and reliability investments.

Financial Highlights

As of Mar 31, 2019, Atmos Energy had cash and cash equivalents of $108.4 million compared with $13.8 million on Sep 30, 2018.

Long-term debt was $3.58 billion as of Mar 31, 2019, up from $2.49 billion on Sep 30, 2018.

The company’s cash flow from operating activities over the six months ended Mar 31, 2019 was $560.9 million, down from $751.4 million recorded in the prior-year comparable period.

Guidance

Atmos Energy now expects its fiscal 2019 earnings guidance in the range of $4.25-$4.35, up from prior expectation of $4.20-$4.35. The midpoint of the revised guided range is $4.30, which is in line with the current Zacks Consensus Estimate for fiscal 2019.

Capital expenditure for fiscal 2019 is expected in the range of $1.65-$1.75 billion.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Atmos has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Atmos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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