Atmos Energy To Issue Equity To Repay Debts, Fund Projects

Atmos Energy Corporation (NYSE:ATO) has priced its public offering of 7,008,087 shares of its common stock at $92.75 per share. Atmos Energy granted the underwriters an option to purchase up to 1,051,213 additional shares of its common stock. This equity issue is expected to cover the company’s equity capital raising needs for fiscal 2019.

Usage of the Proceeds

The company has plans to utilize the proceeds from the equity share to repay short-term debt under its commercial paper program, to fund capital spending primarily to enhance the safety and reliability of its system, as well as for general corporate purposes.

Long-Term Plans

Atmos Energy has plans to increase capital expenditure by 9-10% annually in the fiscal 2019-2023 time frame, which is likely to result in a total capital expenditure within $9-$10 billion in the said period. Out of the planned capital expenditure, nearly 80% will be spent on enhancing system safety and improving the reliability of its operations.

These planned investments are expected to result in annual earnings growth of 6-8% through 2023.

Probable Source of Future Funds

In addition to the internally generated funds, the company might opt for a new debt issue, as nearly 99% of its capital spending starts generating returns within 12 months of investment. The current debt-to-capital ratio of the company is lower than the industry average and its long-term debt is rated as investment grade by the credit rating agencies.

To Sum Up

The company continues to utilize new technology and business processes to improve safety and reliability of its services. The continuous improvement in its services allows it to serve its expanding customer base in eight states. Atmos Energy recorded a 1.1% increase in customer volume at the end of fiscal 2018 from 2016 levels.

Price Movement

In the last 12 months, Atmos Energy’s shares have returned 5.7%, outperforming its industry’s growth of 0.5%.

Zacks Rank & Key Picks

Atmos Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the same sector are One Gas Inc. (NYSE:OGS) , Ameren Corporation (NYSE:AEE) and Entergy Corporation (NYSE:ETR) .

Third-quarter earnings of One Gas, Ameren and Entergy surpassed the Zacks Consensus Estimate by 10.71%, 17.19% and 33.2%, respectively.

One Gas, Ameren and Entergy’s Zacks Consensus Estimate for 2018 earnings has moved up 0.3%, 3.1% and 5.1%, respectively, in the past 30 days.

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