BofA Securities downgrades Atmos Energy stock to Neutral on valuation

Investing.com - BofA Securities downgraded Atmos Energy (NYSE:ATO) from Buy to Neutral on Thursday, citing the stock’s premium valuation compared to industry peers, while raising its price target to $185.00 from $182.00. The stock, currently trading near its 52-week high of $179.70, has delivered an impressive 30.81% return year-to-date.

The research firm noted that Atmos Energy currently trades at a 22% premium to other local gas distribution companies, which BofA believes already reflects the company’s significant growth opportunities in its valuation. InvestingPro data shows the stock trades at a P/E ratio of 24.64x, while maintaining a strong dividend track record with 32 consecutive years of increases.

Despite potential incremental capital expenditure requirements to support economic and data center development in Texas, BofA does not expect these opportunities to drive near-term earnings growth substantially higher than current market expectations. According to InvestingPro’s analysis, which includes 13 additional key insights available to subscribers, technical indicators suggest the stock is currently in overbought territory.

BofA Securities updated its earnings per share estimates for Atmos Energy to $7.41 for fiscal year 2025, $7.95 for 2026, and $8.60 for 2027, slightly higher than its previous estimates of $7.30, $7.83, and $8.52, respectively.

The revised estimates reflect an approximately 8.4% earnings per share compound annual growth rate, which exceeds management’s guidance range of 6% to 8%, with adjustments accounting for the impact of Texas House Bill 4384 that became effective on June 25.

In other recent news, Atmos Energy Corporation reported its third-quarter earnings for fiscal year 2025, aligning with analysts’ expectations by posting an earnings per share (EPS) of $1.16. The company also exceeded revenue projections, reporting $838.77 million compared to the anticipated $821.21 million. Additionally, Atmos Energy announced a public offering of $600 million in senior notes due in 2056, with net proceeds expected to be approximately $589.8 million after expenses.

In terms of analyst activity, Mizuho raised its price target for Atmos Energy to $170, citing the positive impact of Texas House Bill 4384 on the company’s future earnings. Conversely, Ladenburg Thalmann downgraded the stock from Buy to Neutral due to valuation concerns, despite Atmos Energy raising its 2025 EPS guidance to $7.35-$7.45. These developments reflect a mixed sentiment among analysts regarding the company’s valuation and future performance.

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