In this article, we discuss 5 high growth utility stocks to buy. If you want to see more stocks in this selection, check out 11 High Growth Utility Stocks to Buy.
5. Atmos Energy Corporation (NYSE:ATO)
Number of Hedge Fund Holders: 23
Quarterly Revenue Growth YoY as of December 30, 2022: 46.50%
Atmos Energy Corporation (NYSE:ATO) is a Texas-based company engaged in the regulated natural gas distribution, pipeline, and storage businesses in the United States. On February 7, Atmos Energy Corporation (NYSE:ATO) declared a quarterly dividend of $0.74 per share, in line with previous. The dividend is distributable on March 6, to shareholders of record on February 20. Revenue in the fourth quarter of 2022 climbed 46.5% year-over-year to $1.48 billion, beating market estimates by $340 million. It is one of the best high growth utility stocks to invest in.
On February 9, Mizuho analyst Gabriel Moreen increased Atmos Energy Corporation (NYSE:ATO)’s price target to $137 from $128 and maintained a Buy rating on the shares. The analyst noted that the company appears to be more insulated from the challenges that many utilities face.
According to Insider Monkey’s Q3 data, 23 hedge funds were long Atmos Energy Corporation (NYSE:ATO), compared to 21 funds in the last quarter. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 815,901 shares worth $83 million.
Here is what Aristotle Capital Management Value Equity has to say about Atmos Energy Corporation (NYSE:ATO) in its Q1 2022 investor letter:
“Headquartered in Dallas, Atmos Energy is the largest fully regulated natural gas-only utility in the U.S. It serves over three million distribution customers across eight states, primarily in the South. Approximately 70% of its revenue comes from Texas, where it owns one of the largest natural gas pipeline systems in the state.
High-Quality Business
Some of the quality characteristics we have identified for Atmos Energy include:
-Strong balance sheet and financial strength, perhaps most visible during 2021’s winter storm Uri when millions of Texans lost power. The significant spikes in natural gas prices stressed distributors, but Atmos handled over $2 billion of incremental costs with little long-term impact;
-Experienced and shareholder-friendly management team, as demonstrated by 38 consecutive years of dividend increases; and
-Attractive demographics and favorable regulatory environments in the states where it operates.
Attractive Valuation
Given our estimates of higher normalized earnings and dividend payments, we believe shares of Atmos Energy are trading at a discount relative to our estimate of their intrinsic value.
Compelling Catalysts
Catalysts we have identified for Atmos Energy, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
-Old pipes and aging infrastructure, coupled with a growing population, have created a large backlog of safety and maintenance projects – completion of which should drive earnings growth and steady dividend increases. Updates should both increase reliability as well as the value of Atmos Energy’s assets, enhancing profit levels permitted by regulators;
-Well positioned to source low-cost natural gas from prolific basins in Texas to its distribution network, helping to keep customer prices down and economically favorable relative to other sources of energy; and
-Advantageous regulatory environment should continue to support rate adjustments so that revenues are earned on capital projects within six to 12 months.”
