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    Atmos Energy Corp (ATO)

    Q3 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$119.05April 1, 2024
    Final Price$115.98July 1, 2024
    Price Change$-3.07
    % Change-2.58%

    What went well

    • Atmos Energy anticipates 6% to 8% EPS growth off the adjusted EPS for fiscal 2024, indicating strong future earnings potential.
    • The company has strong liquidity and proactive financing, with $551 million in net proceeds from forward sale agreements to satisfy most of their fiscal 2025 equity needs.
    • The APT system contributed significantly to performance due to elevated spreads, and while spreads are expected to revert to the mean, Atmos Energy expects continued activity in this area, potentially providing upside to earnings.

    What went wrong

    • Elevated APT spreads that significantly contributed to third-quarter earnings are expected to revert back to the mean, potentially reducing future earnings growth.
    • Operating and maintenance expenses are expected to increase due to ongoing requirements like hydrostatic testing and regulatory compliance, which may pressure future earnings.
    • Atmos Energy has significant equity issuance plans to fund capital needs, which may dilute existing shareholders' ownership stakes.

    Q&A Summary

    1. EPS Growth Guidance
      Q: What's the expected EPS growth for fiscal '25?
      A: Atmos Energy anticipates 6% to 8% EPS growth off the adjusted fiscal '24 EPS.

    2. Equity Needs for 2025
      Q: How will you address equity needs for 2025?
      A: The company plans to issue $600 million to $800 million in equity annually through its ATM program, with $551 million priced at the end of June to satisfy most of fiscal '25 needs.

    3. O&M Execution
      Q: What are key O&M focus areas for fiscal '25?
      A: Key drivers include hydrostatic testing, line locating, integrity regulations, and marker ball placement, similar to fiscal '24 efforts.

    4. APT Spread Dynamics
      Q: How will APT spreads impact earnings in '25?
      A: Elevated spreads contributed this year but are expected to revert to normal levels; some activity will continue, but the exact impact is unpredictable.

    5. Matterhorn In-Service Impact
      Q: What's the impact of Matterhorn coming online?
      A: The Matterhorn pipeline is expected to start up in early fall, potentially affecting APT dynamics; demand during shoulder months and winter will influence spreads.

    6. APT Sharing Mechanism
      Q: Will strong APT performance reset the sharing threshold?
      A: No, the sharing benchmark is set at $106.9 million and won't change until the next rate case in five years.

    7. Opportunities in Gas Generation
      Q: Are there opportunities in new gas infrastructure?
      A: There are potential opportunities, but Atmos would be one of several suppliers to new gas generation; the company will monitor developments over the next few years.

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