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Why Is Atmos (ATO) Up 8.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Atmos Energy (ATO). Shares have added about 8.1% 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, Revenues Miss

Atmos Energy Corporation posted second-quarter fiscal 2020 earnings of $1.95 per share, which surpassed the Zacks Consensus Estimate by a penny.

The reported earnings also improved 7.1% from the prior-year figure. The year-over-year improvement in earnings was due to positive rate outcomes and customer growth in the distribution segment.

Total Revenues

Total revenues of $978 million missed the Zacks Consensus Estimate of $1,127 million by 13.2% and decreased 10.6% from the year-ago figure of $1,094.7 million.

Segment Revenues

Distribution:
Revenues from the segment decreased 11.8% to $933 million from $1,057.9 million in the prior-year quarter.

Pipeline and Storage: Revenues from the segment increased 7.8% to $146.2 million from $135.7 million in the year-ago quarter. The improvement was driven by an increase in rates, marginally offset by a rise in depreciation expenses.

Quarterly Highlights

Purchased gas cost in the quarter was $317.9 million, down 32.6% from the year-ago period. Operation and maintenance expense in the quarter was $147.8 million, down 1.1% from the year-ago period.

Operating income in the reported quarter was up 11.3% year over year to $331.5 million.

The company incurred interest expenses of $22.2 million, down 17.5% from the year-ago period.

Financial Highlights

As of Mar 31, 2020, Atmos Energy had cash and cash equivalents of $320.1 million compared with $24.6 million on Sep 30, 2019.

Long-term debt was $4.3 billion as of Mar 31, 2020, up from $3.53 billion on Sep 30, 2019.

The company’s cash flow from operating activities in the first six months of fiscal 2020 was $633.8 million, up from $520.8 million recorded in the year-ago period.

It invested $994.7 million in the first six months of fiscal 2020 compared with $777.6 million in the comparable year-ago period. The increase in capital spending was due to continued spending for infrastructure replacements and enhancements.

Guidance

Since the impact of the novel coronavirus remains uncertain, Atmos Energy reiterated its fiscal 2020 earnings guidance in the range of $4.58-$4.73 per share. The Zacks Consensus Estimate for fiscal 2020 earnings is $4.69 per share. Capital expenditure view also remains unchanged and is expected in the range of $1.85-$1.95 billion for fiscal 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Atmos has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise 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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