Atmos (ATO) Down 4.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Atmos Energy (ATO). Shares have lost about 4.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Atmos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Atmos Energy Q1 Earnings Lag Estimates, Sales Drop Y/Y

Atmos Energy Corporation posted first-quarter fiscal 2020 earnings of $1.47 per share, which lagged the Zacks Consensus Estimate of $1.49 by 1.3%.

However, the reported earnings improved 6.5% from the prior-year figure. The year-over-year improvement in earnings was due to positive rate outcomes.

Total Revenues

Total revenues of $875.6 million decreased 0.3% from the year-ago figure of $877.8 million. The year-over-year decline in revenues was due to lower contribution from the distribution segment.

Segment Revenues

Distribution: Revenues from the segment decreased 1.2% to $828.5 million from $838.8 million in the prior-year quarter.

Pipeline and Storage: Revenues from the segment increased 10.2% to $148.2 million from $134.5 million in the year-ago quarter. The improvement was driven by increase in rates, marginally offset by increase in operation and maintenance expenses.

Quarterly Highlights

Total expenses in the reported quarter decreased 2.9% from the year-ago level to $622.8 million due to lower purchased gas cost, offset by higher operation and maintenance expenses, as well as depreciation and amortization costs.

Operating income in the reported quarter was up 6.9% year over year to $252.8 million.

The company incurred interest expenses of $27.3 million, down 2.2% from the year-ago period.

Financial Highlights

As of Dec 31, 2019, Atmos Energy had cash and cash equivalents of $189.3 million compared with $24.6 million on Sep 30, 2019.

Long-term debt was $4.3 billion as of Dec 31, 2019, up from $3.53 billion on Sep 30, 2019.

The company’s cash flow from operating activities in first-quarter fiscal 2020 was $172.5 million, up from $164.7 million recorded in the year-ago period.

It invested $529.2 million in fiscal first-quarter 2020 compared with $414.4 million in fiscal first-quarter 2019. The increase in capital spending was due to continued spending for infrastructure replacements and enhancements.

Guidance

Atmos Energy reiterated its fiscal 2020 earnings guidance in the range of $4.58-$4.73 per share. The Zacks Consensus Estimate for fiscal 2020 earnings is $4.68 per share. Capital expenditure is expected in the range of $1.85-$1.95 billion for fiscal 2020.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, Atmos has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Atmos has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.