Atmos Energy Corporation (ATO) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with a 9.4% increase in net income and significant customer growth. The company's strategic investments in safety and reliability, along with EPS and dividend growth projections, are positive indicators. Despite some uncertainties regarding annualized benefits, management maintains optimistic guidance. The Q&A section highlights effective handling of Winter Storm Fern and no significant regulatory concerns. The overall sentiment is positive, with prospects of further growth and stability, likely leading to a stock price increase in the short term.
Key Financial Performance
Net Income $403 million or $2.44 per diluted share for the first quarter of fiscal 2026, representing a 9.4% increase over the prior year quarter. The increase was influenced by factors such as the impact of Texas House Bill 4384 ($35 million or $0.16), rate increases in operating segments ($68 million), and customer growth and increased customer load ($24 million).
Capital Expenditures $1 billion in the first quarter of fiscal 2026, with over 85% focused on enhancing the safety and reliability of distribution, transmission, and underground storage systems.
Operating Income Increased by $24 million due to residential and commercial customer growth and increased customer load.
Through System Revenues (APT) Increased by $7 million net of Rider REV. However, through system volumes declined by approximately 2 Bcf due to increased maintenance activities compared to the prior year quarter. Spreads widened significantly to an average of $3.99 compared to $1.56 in the prior year quarter, driven by rising associated gas production, constrained takeaway capacity, and lower demand due to unseasonably warm weather.
Consolidated O&M Expense Increased by $23 million, driven by $12 million in compliance and safety-related spending (e.g., increased leak survey work and maintenance timing) and $5 million in employee-related costs (e.g., increased headcount, higher overtime, and standby costs).
Customer Growth Added nearly 54,000 new customers in the 12 months ending December 31, 2025, with 42,000 in Texas. During the first quarter, added over 1,100 commercial customers and 3 new industrial customers.
Long-Term Debt and Equity Financing Completed over $1 billion in the first quarter, including $600 million in long-term debt financing and $472 million in equity forward agreements. Equity capitalization as of December 31 was 60%, with $4.6 billion in available liquidity.
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Operating Highlights
Pipeline Projects: Completed installation of 55 miles of 36-inch pipeline from Bethel storage to Groesbeck compressor station, enhancing capacity for DFW Metroplex and Interstate 35 corridor. Phase 2 of Line WA Loop project underway, with 13 miles completed and 31 miles expected by spring.
Storage Facility Expansion: Doubled takeaway capacity at Bethel Salt Dome storage facility, improving peak day deliverability.
Interconnect Projects: Completed 2 interconnect projects, adding 700,000 Mcf/day of natural gas supply to the APT system.
Customer Growth: Added nearly 54,000 new customers in 2025, with 42,000 in Texas. First quarter of 2026 saw 1,100 new commercial customers and 3 industrial customers.
Economic Development: Texas added jobs at a faster rate than the national average, supporting demand for natural gas.
Customer Satisfaction: Achieved 98% customer satisfaction rating for the quarter. Recognized by J.D. Power and Escalent for customer service excellence.
Regulatory Filings: Implemented $123 million in annualized operating income increases. Five filings in progress seeking $81 million more, with an additional $400 million filing planned.
Financial Guidance: Rebased fiscal 2026 earnings per share guidance to $8.15-$8.35 and annual dividend to $4 per share, with 6%-8% annual growth planned.
Capital Spending: On track to achieve $4.2 billion capital spending plan for fiscal 2026.
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Risk or Challenges
Weather-related challenges: Winter Storm Fern posed challenging weather conditions, but the company managed to maintain operations effectively. However, such extreme weather events could strain resources and operational capacity in the future.
Operational costs: There was a $23 million increase in consolidated O&M expenses, driven by compliance and safety-related spending, increased leak survey work, and higher employee-related costs such as overtime and standby costs.
Maintenance disruptions: APT's through system volumes declined by approximately 2 Bcf due to increased maintenance activities during the quarter, which could impact revenue if such disruptions persist.
Regulatory risks: The company has several regulatory filings in progress, seeking significant operating income increases. Delays or unfavorable outcomes in these filings could impact financial performance.
Market conditions: Spreads widened significantly due to rising associated gas production, constrained takeaway capacity, and lower demand caused by unseasonably warm weather, which could create revenue volatility.
Debt and financing risks: The company completed over $1 billion in long-term debt and equity financing. While this supports growth, it increases financial leverage and potential exposure to interest rate fluctuations.
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Guidance & Outlook
Fiscal 2026 Earnings Per Share Guidance: Rebased to a range of $8.15 to $8.35 per share.
Fiscal 2026 Annual Dividend: Rebased to $4 per share, with plans to grow the dividend in line with earnings per share growth of 6% to 8% annually.
Atmos Pipeline-Texas (APT) Line WA Loop Project: Phase 2 is ongoing, with 13 miles completed and the remaining 31 miles expected to be placed in service this spring.
Capital Spending Plan for Fiscal 2026: On track to achieve $4.2 billion in capital expenditures.
Customer Growth: Steady growth observed, with nearly 54,000 new customers added in 2025 and continued demand across all customer classes.
Regulatory Filings: Plans to make an additional filing this fiscal year seeking approximately $400 million in annualized operating income increases.
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Shareholder Return Plan
Fiscal 2026 Annual Dividend: Rebased to $4 per share.
Dividend Growth Plan: Plan to grow dividend in line with earnings per share growth of 6% to 8% annually.
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Key Q&A
Q:Can you talk about the $35 million benefit for the quarter and how it should be considered throughout the year?
A:The $35 million benefit is influenced by the timing of spending, project closings, and operational activities. The company is holding firm on its earnings per share guidance of $8.15 to $8.35 and advises against simply annualizing the $35 million figure.
Q:Would you assume the $35 million is a good run rate for the year?
A:It depends on the flow of spending in the quarter. Construction activities were down due to Winter Storm Fern, and the company advises against multiplying $35 million by 4 for an annual estimate.
Q:What are the preliminary financial impacts of Winter Storm Fern?
A:The storm was significant but not as impactful as Winter Storm Uri. Supply performed well with minimal issues, and the company had a strong gas supply plan in place. There is no expectation of significant operational or financial impacts from the storm.
Q:What are you hearing about affordability pressures in regulatory proceedings?
A:Affordability is always a topic with regulators, but there is no negative feedback. Regulators understand the need for investments to maintain reliability and safety.
Q:Are there any meaningful projects on the gas power side, such as major power plants or on-site power at data centers?
A:The company continues to receive inquiries about large loads, including data centers and power generation. Updates will be provided once contracts are signed.
Q:What is the impact of the recent special election in Texas on the business?
A:The company is apolitical and works with all political parties. The election outcome does not impact the business strategy or operations.
Q:How does the Mississippi rate case outcome affect the company's plans?
A:The outcome does not change the company's plans, which are driven by system needs, safety, and reliability. The company is in dialogue with the commission and has filed an appeal to the State Supreme Court.
Q:Can the $0.21 Texas benefit in the quarter be annualized?
A:The impact was approximately $0.16 for the quarter. The company advises against annualizing this figure due to operational timing and variability.
Q:What was the margin benefit from Waha spread this quarter?
A:The company attributed about $7 million in operating income increase due to Waha spread activities.
Q:Are there incremental opportunities to add gas storage given recent storms and increasing gas demand?
A:The company evaluates storage needs post-winter based on system performance, customer growth, and demand expectations. It currently has 15 storage fields and additional third-party and upstream storage contracts.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about the annualization of the $35 million benefit and the $0.21 Texas benefit, advising caution against simple multiplication without providing clear alternative guidance.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
APT system
Atmos Energy
Customer
DFW Metroplex
Escalent
JD Power
Midwest region
South Midwest
Storm Fern
Texas
Utility
Winter Storm
assistance
customer satisfaction
customer service
customer support
dedication
effort
facility
gas service
gas supply
project mile
responder emergency
service territory
share dividend
storage
ATO Transcript
Atmos Energy Corporation (ATO) Q1 2026 Earnings Call Transcript
Positive2-4
The earnings call reveals strong financial performance with a 9.4% increase in net income and significant customer growth. The company's strategic investments in safety and reliability, along with EPS and dividend growth projections, are positive indicators. Despite some uncertainties regarding annualized benefits, management maintains optimistic guidance. The Q&A section highlights effective handling of Winter Storm Fern and no significant regulatory concerns. The overall sentiment is positive, with prospects of further growth and stability, likely leading to a stock price increase in the short term.
Atmos Energy Corporation (ATO) Q4 2025 Earnings Call Transcript
Positive11-6
The earnings call reveals strong financial performance with 23 years of EPS growth, increased dividends, and strategic capital spending focused on safety and reliability. The positive impact of Texas legislation and customer growth further support a positive outlook. Although there are financing risks and management's reluctance to address certain market fluctuations, the overall sentiment is bolstered by optimistic guidance and consistent dividend growth, suggesting a positive stock price movement in the short term.
Manulife Financial Corporation (MFC) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call indicates positive sentiment, with strong customer growth, strategic acquisitions enhancing long-term value, and optimistic guidance. Despite some financial impacts from transitions, management shows confidence in achieving future growth targets. The Comvest acquisition is seen as strategically beneficial, and there is a focus on efficiency to offset transitional costs. The Q&A highlights strategic growth in key markets and confidence in achieving financial targets, suggesting a positive outlook for stock price movement.
Atmos Energy Corporation (ATO) Q3 2025 Earnings Call Transcript
Unknown8-7
The earnings call presents mixed signals: strong customer growth and revenue increase are positive, but rising O&M costs and higher debt expenses are concerning. The Q&A reveals some uncertainties, particularly regarding capital projects and legislative impacts. While guidance is optimistic, the lack of clarity and potential economic challenges in Texas temper enthusiasm. Without significant market cap data, the overall sentiment is neutral as positives and negatives balance each other out.
ATO Slides
ATO Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Why do some answers appear as “Unclear” or “Inaudible”?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
