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Jefferies has initiated coverage on shares of Atmos Energy (NYSE: NYSE:ATO) with a Hold rating and set a price target of $155.00. The firm's decision reflects its expectation of the company's steady performance in the medium term relative to its peers in the gas sector.
The coverage launch is based on a projection of Atmos Energy's earnings per share (EPS) growing at a compound annual growth rate (CAGR) of 7.2% from 2024 to 2028.
The growth estimate is notably higher than the 6.3% CAGR anticipated by other analysts and slightly above the company's own guidance midpoint of 7.0%.
According to the firm, this growth will be supported by an anticipated 12% rate base growth and a consistent regulatory environment.
The firm acknowledges that Atmos Energy stands out for its medium-term outperformance when compared to its gas utility peers. The positive outlook is, however, tempered by the company's current valuation, which trades at a premium within the sector.
Additionally, the firm points out potential challenges that Atmos Energy may face, including increasing bill inflation and the impact of cash taxpayer headwinds expected by 2026. These factors contribute to the firm's decision to maintain a Hold rating despite the positive growth forecast.
In other recent news, Atmos Energy Corporation has successfully issued $650 million in senior notes, securing approximately $638.1 million in net proceeds. The strategic financial move was facilitated by Mizuho Securities USA, TD Securities, and U.S. Bancorp Investments. These funds are expected to enhance the company's financial flexibility and support its ongoing and future projects.
In addition to this, Atmos Energy has seen a rise in its third fiscal quarter 2024 earnings per share, increasing from $5.33 to $6, driven by regulatory outcomes, customer expansion, and robust system revenues. The company also welcomed Michelle H. Faulk as Vice President and Controller, and Telisa Toliver to its board of directors.
In terms of analyst notes, Mizuho Securities has raised Atmos Energy's price target from $138 to $148, maintaining an Outperform rating. Edward Jones and Ladenburg Thalmann also maintain a Buy rating on the company, citing potential for above-average earnings growth and a strong balance sheet. Atmos Energy anticipates its fiscal '24 earnings per share to be at the higher end of the $6.70 to $6.80 range, projecting a 6% to 8% EPS growth through fiscal '28.
InvestingPro Insights
Atmos Energy's recent performance and financial metrics align with Jefferies' Hold rating and positive growth outlook. According to InvestingPro data, the company's stock has shown strong momentum, with a 20.02% price total return over the past three months and a 39.02% return over the past year. This performance has brought the stock price to 99.53% of its 52-week high, trading at $138.98 as of the last close.
The company's financial health appears robust, with a P/E ratio of 20.43 and a dividend yield of 2.32%. InvestingPro Tips highlight that Atmos Energy has raised its dividend for 31 consecutive years, demonstrating a commitment to shareholder returns that supports Jefferies' projected total shareholder return of 13.8%.
Furthermore, Atmos Energy's profitability and growth prospects are underscored by additional InvestingPro Tips. The company has been profitable over the last twelve months, and analysts predict continued profitability this year. This aligns with Jefferies' forecast of a 7.2% CAGR in EPS from 2024 to 2028.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Atmos Energy, providing deeper insights into the company's financial position and market performance.
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