ATMOS ENERGY CORP ATO

Atmos Energy reported diluted EPS of $7.46 for fiscal 2025, marking 23 consecutive years of EPS growth and 41 consecutive years of dividend growth. The company's rate base grew by 14% to an estimated $21 billion as of September 30, 2025, driven by $3.6 billion in consolidated capital spending, with 87% dedicated to safety and reliability. O&M, excluding bad debt expense, was $874 million, slightly above the midpoint of updated guidance.

The company experienced solid customer growth in FY25, adding approximately 57,000 residential customers (over 44,000 in Texas) and nearly 3,200 commercial customers. 29 new industrial customers are anticipated to consume 4 Bcf of gas annually when fully operational, equivalent to 74,000 residential customers. Over the last five years, industrial customers added represent 63 Bcf annual load, equivalent to 1.2 million residential customers, demonstrating vital role of natural gas in economic development.

The passage of Texas House Bill 4384 is a significant positive, reducing regulatory lag by permitting deferral of post-in-service carrying costs, depreciation, and ad valorem taxes for non-eligible Rule 8209 capital investments. This legislation enables recovery of over 95% of capital spending within 6 months and 99% within 12 months, compared to a previous 90% within 12 months. Approximately 60% of the impact is expected in the distribution segment over the 5-year plan, with the remaining 40% at APT.

Atmos Energy unveiled an updated 5-year capital plan through fiscal 2030, totaling $26 billion. Approximately 85% of this investment is allocated to safety and reliability, focusing on modernizing natural gas distribution, transmission, and storage systems. Texas is a major focus, with $21 billion (80%) of the planned capital spending directed there, including $15 billion for distribution and $6 billion for APT, supporting anticipated 13-15% annual rate base growth.

The company benefits from supportive regulatory jurisdictions, with 96% of its rate base situated in states with customer choice for all fuels legislation. In fiscal 2025, $334 million in annualized operating income increases were implemented. For fiscal 2026, $146 million in annualized operating income increases have already been implemented in the distribution segment, with $139 million from the Mid-Tex annual rate review mechanism, assuming existing ROEs and capital structures.

Atmos Energy maintains a strong balance sheet with 60% equity capitalization and approximately $4.9 billion of available liquidity, including $1.6 billion in forward equity proceeds from its ATM program. The weighted average cost of debt is 4.2% with an average maturity of 17.5 years. Management emphasized customer affordability, noting that the average monthly natural gas bill is expected to remain the lowest utility bill in the home, being 2 to 5 times more affordable than electric counterparts.

The Bethel to Groesbeck project, involving 55 miles of 36-inch pipeline, is nearing completion and is anticipated to be in service late calendar year 2025. This project will enhance pipeline capacity to the DFW Metroplex and the Interstate 35 corridor. Additionally, APT's Line WA Loop Phase 2 project, comprising 44 miles of 36-inch pipeline, is also expected to be in service late calendar year 2025, providing additional capacity to the northern DFW Metroplex.