Atmos Energy (ATO) has received a new Hold rating, initiated by Wolfe Research analyst, Steve Fleishman.
Steve Fleishman has given his Hold rating due to a combination of factors that reflect both the strengths and challenges facing Atmos Energy. The company boasts a robust growth profile with a leading rate base growth of 13-15% and a strong balance sheet, which supports a 6-8% growth in earnings per share and dividends. Additionally, Atmos Energy benefits from constructive regulatory mechanisms and a favorable geographic concentration in Texas, which help mitigate operational lag.
Despite these positives, Fleishman considers the current valuation of Atmos Energy to be fair, given its trading at a 10-15% premium. The company’s significant equity needs, estimated at $5.2 billion over the next few years, pose a potential risk, especially in the event of a market downturn. Furthermore, the projected growth in customer bills, which exceeds historical inflation levels, could lead to regulatory challenges if gas prices rise sharply. These factors contribute to the decision to rate the stock as Hold, indicating that while the company has strong fundamentals, the current market conditions do not present an optimal entry point for investment.
Based on the recent corporate insider activity of 22 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of ATO in relation to earlier this year.