Friday - UBS has initiated coverage on Atmos Energy Corporation (NYSE:ATO) with a Neutral rating and a price target of $124.00. The firm forecasts that Atmos Energy will experience a 7.3% earnings per share (EPS) compound annual growth rate (CAGR) from 2023 through 2028, which is expected to be supported by a 12% rate base growth.
The company is noted to operate under regulatory frameworks that are generally supportive, allowing for a significant portion of its capital expenditures to start contributing to earnings within a relatively short time frame. Specifically, 90% of these expenditures are projected to impact earnings within six months, and 99% within a year.
Atmos Energy is recognized for having one of the strongest balance sheets in the electric and gas utility sector. UBS estimates that the company will maintain approximately a 21% funds from operations (FFO) to debt ratio and about a 60% consolidated equity ratio over the forecast period. This financial stability is anticipated to be bolstered by an estimated $800 million per year in equity issuance.
Despite the positive outlook on the company's growth and financial health, UBS suggests that these favorable aspects are already reflected in the current stock price, which trades at roughly a 10% price-to-earnings (P/E) premium compared to its peers. The earnings outlook provided by UBS for Atmos Energy, with estimates of $7.12 and $7.60 for the fiscal years 2025 and 2026 respectively, aligns closely with the consensus.
InvestingPro Insights
As we consider the financial outlook and stability of Atmos Energy Corporation, InvestingPro data offers a snapshot of the company's current standing. With a market capitalization of $17.25B and a P/E ratio of 18.27, Atmos Energy is trading at a valuation that mirrors UBS's analysis of a premium relative to its peers. The company's revenue over the last twelve months as of Q1 2024 stands at approximately $3.95B, though it has experienced a decline of 15.47% in that period. Despite this, the dividend yield remains attractive at 2.77%, with a notable 8.78% growth in dividends, reflecting the company's commitment to shareholder returns.
Two InvestingPro Tips that may be particularly relevant to investors are the company's consistent history of dividend payments, with dividends raised for 31 consecutive years, and its low price volatility, which could appeal to investors seeking stability. Additionally, while analysts have revised earnings downwards for the upcoming period, the company is still expected to be profitable this year, with profitability sustained over the last twelve months.
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