Atmos Energy Corporation
Analysis
Texas rewrote the rules so Atmos gets paid back for its pipe replacement almost as it spends, and a five-year, $26 billion build now turns into earnings far sooner. The catch: this year's profit jump leaned on a Permian gas windfall that is already fading. How much of the $26 billion plan is already earning a return?
- Texas now pays Atmos back almost as fast as it spends.
Texas House Bill 4384 and its Rule 7.7102 let Atmos collect for new pipes within about six months instead of waiting for a rate case. Money that used to arrive years later now lands while the work is going on. How much of the guidance raise came from Texas deferrals?
- This year's profit jump leaned on a gas-price windfall that is already reversing.
APT earns money moving gas across Texas, and the gap between West Texas and other markets ran far wider than usual this year, adding $0.63 a share so far. That gap narrowed sharply from June as new pipelines opened early. What does APT earn when Permian spreads return to normal?
- The build is paid for with borrowed money and newly issued shares.
Capital spending runs about $4 billion a year, more than the business brings in as cash. Atmos is funding another $16 billion with new debt and new shares, so each dollar of growth is shared with more owners.
- Texas customer growthTexas population and business growth keep adding homes, businesses and industrial users, so the company's spending is driven by demand it can see in its territory.
- Rebased earnings guidanceManagement has raised and rebased its guidance and now describes the new range as a starting point for steady long-term growth rather than a one-year benefit.
- Faster Texas cost recoveryBecause Texas law now shortens the wait to recover spending, capital can be put to work faster and converted into earnings sooner than under the old rules.
- Equity-funded capital planThe building plan is funded with borrowed money and newly issued shares, so earnings per share grow more slowly than the asset base and depend on open capital markets.
- Texas regulatory concentrationMost of the spending sits in Texas, so a change in state law or a less generous rate decision there would affect nearly the whole investment plan.
- Permian gas spread volatilityPipeline profit comes from regional gas price gaps that have already narrowed as new pipelines started up, and most of that upside is shared back with customers.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$15K | Jun 12 | Aug 22 |
Donald Trump Republican · Executive | Sale | ≥$1K | May 11 | Jul 1 |
John Boozman Republican · Senate · AR | Sale (Full) | ≥$1K | Jun 12 | Jul 13 |
Ro Khanna Democratic · House · CA-17 | Sale | ≥$1K | Jan 29 | Feb 6 |
Jared Moskowitz Democratic · House · FL-23 | Purchase | ≥$1K | Dec 2 | Jan 16 |
Congressional trading data provided by QuiverQuant
How Atmos Energy turned $4.7B of revenue into $1.6B of operating income.
| Revenue | ||
|---|---|---|
| Distribution Segment | $4.4B | ▲ 13.03% YoY |
| Pipeline and Storage Segment | $1.1B | ▲ 13.33% YoY |
| Total revenue | $4.7B | |
| Gross profit | $3.6B | 77.3% |
| Operating income | $1.6B | 33.2% |