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On Tuesday, Mizuho (NYSE:MFG) Securities demonstrated confidence in Atmos Energy Corporation (NYSE: NYSE:ATO), raising its price target from $148.00 to $165.00 while maintaining an Outperform rating on the stock. This adjustment follows Atmos Energy's recent financial performance, which surpassed both Mizuho's and consensus estimates for the fiscal year 2024 earnings per share (EPS).
The company reported an EPS of $6.83, exceeding the anticipated $6.79 and the upper end of its guidance range of $6.70 to $6.80. Furthermore, Atmos Energy provided guidance for fiscal year 2025 that is 7.4% higher than the normalized fiscal year 2024 figures, outpacing the midpoint of its targeted compound annual growth rate (CAGR) of 6-8%. This outlook is particularly notable given the company's fiscal year 2024 outperformance and increased profits from Waha spreads.
Atmos Energy's updated five-year capital expenditure plan revealed a substantial 41% increase, equating to an additional $7 billion over the previous plan, which had seen an approximate 12% increase. The company has also revised its rate base CAGR forecast to 13-15%, up from 11-13%. Despite this, it has maintained its 6-8% EPS growth outlook, with management acknowledging a conservative stance on this projection.
The analyst at Mizuho believes that the updated guidance underscores Atmos Energy's consistent ability to achieve the higher end of its targets. This performance supports the firm's view that Atmos Energy warrants a premium valuation among local distribution companies (LDCs). The price target increase to $165 is based on higher estimates and a rolled valuation to fiscal year 2027 estimates.
In other recent news, Atmos Energy Corporation reported a 12% increase in earnings per share (EPS) for Fiscal 2024, reaching $6.83. This marks the 22nd year of consistent EPS growth for the company. Looking ahead, Atmos Energy has provided EPS guidance for Fiscal 2025, projecting an increase to between $7.05 and $7.25.
In addition to its earnings growth, the company has also announced a significant capital investment plan for the next five years, totaling $24 billion. This plan focuses on safety and system modernization. Atmos Energy has also managed to add over 59,000 new customers, primarily in the DFW Metroplex, and has approved an 8.1% dividend increase to $3.48 annually.
In terms of future expectations, the company anticipates a rate base increase to about $37 billion by the end of Fiscal 2029. However, it's worth noting that these are company projections and may be subject to change.
For now, Atmos Energy remains optimistic about its long-term outlook, emphasizing a conservative approach to future planning and a commitment to meeting customer demands.
InvestingPro Insights
Atmos Energy Corporation's recent performance and Mizuho's bullish outlook are further supported by data from InvestingPro. The company's stock is currently trading near its 52-week high, with a strong return of 16.03% over the last three months and an impressive 34.98% over the past six months. These figures align with Mizuho's positive stance and increased price target.
InvestingPro Tips highlight Atmos Energy's commitment to shareholder value, noting that the company has raised its dividend for 32 consecutive years and maintained dividend payments for 42 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 2.32%, underscores the company's financial stability and aligns with its strong performance mentioned in the article.
The company's P/E ratio of 22.48 (adjusted for the last twelve months) suggests that investors are willing to pay a premium for Atmos Energy's shares, reflecting confidence in its future growth prospects. This valuation is consistent with Mizuho's view that Atmos Energy deserves a premium valuation among LDCs.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 10 more tips available for Atmos Energy on the platform.
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