Morgan Stanley’s Best Overweight & Quality Stocks: Top 25 Stocks

8. Atmos Energy Corporation (NYSE:ATO)

Number of Hedge Fund Holders In Q2 2024: 18

Average Analyst EPS % Revision: 1.3%

Atmos Energy Corporation (NYSE:ATO) is a sizeable Texas based natural gas utility that caters to the needs of more than 3 million customers. It is a regulated utility, which means that the firm is able to withstand periods of weak natural gas prices courtesy of return of equity rates that are predetermined. This has proven to be quite important in today’s weak natural gas market, with Atmos Energy Corporation (NYSE:ATO)’s shares up 18.6% year to date and 19% since July start. The utility has also benefited from its strong pipeline infrastructure, which ironically, has seen pipeline companies experience stronger demand for their infrastructure due to high US natural gas production which has depressed gas prices. In essence, Atmos Energy Corporation (NYSE:ATO)’s tariffs and pipeline have enabled it to access the best of both worlds in a tough gas market. Moving forward, potential catalysts can include pipeline expansion and favorable rates, while the shares can retreat in case of regulatory headwinds and lower natural gas production.

During the Q2 2024 earnings call, here’s what Atmos Energy Corporation (NYSE:ATO)’s management had to say about the rest of the year:

“All regulatory outcomes that can impact fiscal ’24 has been implemented. As I mentioned ago, we anticipate spreads for APTs through system business will remain elevated, which will modestly contribute to our Q4 results. And we have a reasonably clear line of sight and consistent compliance, maintenance, and monitoring we will be performing in the fourth quarter. As a reminder, our guidance range includes two items totaling $0.17 that we will exclude when we initiate our ’25 guidance in November. The first item is the Texas property tax benefit that we have been discussing all fiscal year, which should favorably impact fiscal ’24 results by $0.10. Additionally, the one-time Mississippi Fed debt adjustment for represented $0.07.”