Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Position Status | Return(%)* |
|---|---|---|---|---|---|---|---|---|
| 23 Apr, 25 | ATO | Buy | USD 160.11 | USD 170.0 | USD 180.0 | 91 days | Closed |
1.38%
|
*Return(%) represent the percentage change between the entry price and exit price of the recommendation.
Data Powered by EOD Historical Data (“EODHD”).
Atmos Energy Corporation, together with its subsidiaries, engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. It operates through two segments, Distribution, and Pipeline and Storage. The Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately 3.3 million residential, commercial, public authority, and industrial customers; and owned 73,689 miles of underground distribution and transmission mains. The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage facilities in Texas; provides ancillary services customary to the pipeline industry, including parking arrangements, lending, and inventory sales; and owned 5,645 miles of gas transmission lines. Atmos Energy Corporation was founded in 1906 and is headquartered in Dallas, Texas.
Customer Growth: Approximately 34,000 new distribution customers were added, marking a 1.6% year-over-year increase
Operating Income Increase: First-quarter operating income grew by 9.3%, reaching $431.7 million, indicating strong profitability
Equity Dilution Risk: The company plans to use its ATM (At-The-Market) equity issuance program, which could lead to shareholder dilution
High Capital Expenditures: The company spent $817.5 million in just one quarter on capital investments, pressuring near-term cash flow
Atmos Energy's investment risk primarily stems from its dependence on favorable regulatory outcomes to recover substantial capital expenditures, exposing the company to earnings volatility if rate requests are delayed or denied
| Entry Price | Support* | Target 1** | Target 2** |
|---|---|---|---|
| 160.11 | 148.0 | 170.0 | 180.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
**Target prices may vary by ±0.5% depending on market volatility.
Financial Overview
Atmos Energy Corporation reported solid financial performance for the first quarter of fiscal year 2025. Operating income reached $431.7 million, reflecting a 9.3% year-over-year increase. This was supported by a $120.1 million growth in distribution operating income, driven by infrastructure investments and customer growth. Diluted earnings per share rose 10.2% to $2.08, highlighting the company's ability to generate shareholder value despite external pressures such as inflation and regulatory scrutiny.
Capital Expenditures and Infrastructure Investment
The company remains focused on enhancing safety and reliability through sustained capital investments. For the first quarter, Atmos Energy invested approximately $817.5 million in capital expenditures. Of this, over 88% was allocated toward system modernization and pipeline safety, consistent with its long-term strategy. The company reaffirmed its full-year capital expenditure guidance of $3.0 billion to $3.3 billion, indicating continued commitment to infrastructure resiliency.
Regulatory Progress and Rate Outcomes
Atmos Energy reported constructive regulatory outcomes, including $104.6 million in annualized rate increases achieved during the first quarter. The company filed 10 regulatory rate cases and anticipates several others in fiscal 2025. These favorable decisions contribute to cost recovery on capital expenditures and support earnings growth. The regulatory environment remains generally supportive, allowing the company to maintain its investment-grade credit profile.
Customer Growth and Market Expansion
Customer additions continued to support long-term growth. The company added approximately 34,000 new distribution customers year-over-year, contributing to a 1.6% customer growth rate. This reflects ongoing population migration trends into Atmos Energy's service territories, particularly in Texas and other high-growth regions. The growth provides additional scale and reinforces the economics of system modernization initiatives.
Operational Performance and Safety Initiatives
Atmos Energy continues to emphasize operational excellence and safety. The firm reported the replacement of over 600 miles of distribution and transmission pipelines during the quarter, significantly reducing risk and enhancing long-term system reliability. These efforts align with the company's goal to operate one of the safest natural gas delivery systems in the country.
Outlook and Guidance
Looking forward, Atmos Energy reaffirmed its fiscal 2025 earnings per diluted share guidance range of $6.55 to $6.75. The company expects to fund its capital expenditure program with a mix of operating cash flow, equity issuances under its ATM program, and long-term debt. The management emphasized its long-term commitment to safe, reliable, and affordable natural gas delivery, while maintaining fiscal discipline and regulatory transparency.
Environmental and Sustainability Focus
Although not the central theme of the earnings call, Atmos Energy reiterated its long-term sustainability goals, which include reducing methane emissions and increasing energy efficiency. Progress on these initiatives supports its ESG framework and is becoming increasingly important to institutional investors and regulatory stakeholders.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given to Atmos Energy Corporation (NYSE: ATO) at the closing market price of USD 160.11, as on April 22, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Utilities Industry: Utilities - Regulated Gas
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ATO Atmos Energy Corporation |
0.82 0.53% | 156.93 | 20.65 | 19.88 | 5.35 | 1.81 | 7.17 | 14.25 |
| GASNF Naturgy Energy Group S.A |
0.005 0.02% | 31.03 | 11.45 | 15.02 | 0.98 | 2.71 | 1.38 | 7.70 |
| GASNY Naturgy Energy Group SA ADR |
- -% | 6.26 | 11.97 | 15.92 | 0.98 | 2.87 | 1.38 | 7.70 |
| SNMRY Snam SpA ADR |
-0.15 1.28% | 11.54 | 13.09 | 12.89 | 5.31 | 1.84 | 9.36 | 10.63 |
| HOKCY Hong Kong and China Gas Co Ltd ADR |
- -% | 0.84 | 17.36 | 17.27 | 0.23 | 1.65 | 0.33 | 1.41 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is April 22,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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