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Investing.com -- Mizuho downgraded Atmos Energy Corp (NYSE:ATO) to Neutral from Outperform, saying the stock’s sector-leading valuation leaves little room for further multiple expansion despite solid fundamentals.
The firm lowered its price target by $1 to $164, applying a 19.5x P/E multiple to its 2027 earnings estimates, which remain above Street consensus.
While the firm acknowledged Atmos’ strong execution, supportive regulatory environment, and consistent earnings growth, it said the premium valuation is already reflecting these strengths.
Mizuho (NYSE:MFG) expects a solid fiscal second quarter update on May 7, with potential for Atmos to narrow guidance toward the upper end of its range.
However, the firm said colder weather and pipeline dynamics likely had a modest impact in the quarter and that future catalysts appear limited.
Longer-term, Mizuho projects Atmos will need to ramp up equity issuances beginning in FY27 to meet its $15 billion five-year financing plan, a factor that could weigh on the company’s ability to accelerate earnings growth.
Atmos shares are up 13.6% year-to-date, among the best performers in the local distribution company (LDC) group, versus a 4.8% gain for the UTY Index.
We view further multiple expansion as unlikely given the company’s significant sector-leading premium versus all utilities, not just gas utility peers," Mizuho said.
Mizuho noted that Atmos’ 18.9x FY27E P/E leads the utility sector and would require the company to raise its long-term targets to justify further upside, a move seen as unlikely in the near term.