Atmos Energy Corporation Beat Revenue Forecasts By 7.7%: Here's What Analysts Are Forecasting Next

Atmos Energy Corporation (ATO) delivered a strong second-quarter performance, with revenue surpassing analyst expectations by 7.7%, driven by robust customer growth, regulatory successes, and operational efficiencies. The results prompted the company to raise its fiscal 2025 earnings guidance, fueling optimism among investors. Here’s a deep dive into what’s ahead for this gas utility leader.

A Strong Q2 Performance

Atmos reported Q2 2025 revenue of $1.95 billion, exceeding the $1.82 billion consensus estimate by 7.7%. This marked the fourth consecutive quarter of beating earnings expectations, with adjusted EPS rising to $3.03, up 6.3% year-over-year. The beat was particularly notable in the company’s pipeline and storage segment, where transported volumes jumped 10%, contributing $11.4 million to revenue growth.

Key Drivers of Growth

1. Customer Expansion: Atmos added 58,800 new distribution customers in the past year, with 46,000 in Texas alone. Industrial demand also surged, with nine new customers committing to an annual gas load of 8 billion cubic feet (Bcf).
2. Rate Increases: Regulatory outcomes delivered $185 million in rate hikes across operating segments, while $152.6 million in annualized gains were implemented.
3. Operational Strength: Consolidated distribution throughput rose 7.5% to 189.5 million cubic feet, reflecting improved efficiency and system reliability.

Revised Guidance and Analyst Forecasts

Following the strong results, Atmos raised its fiscal 2025 diluted EPS guidance to $7.20–$7.30, up from $7.05–$7.25. This new range exceeds the current Zacks Consensus Estimate of $7.19, suggesting further upside potential.

Analysts are optimistic about the company’s long-term prospects:
- 2026 EPS estimates: Analysts project a 7.9% increase to $7.77, fueled by ongoing infrastructure investments and regulatory recoveries.
- Capital Allocation: Atmos plans to spend $3.7 billion in 2025, with 85% directed toward safety and reliability upgrades, including pipeline replacements and system modernization.
- Dividend Growth: A 8.1% dividend hike to $0.87 per share marks the 38th consecutive year of dividend increases, reinforcing the stock’s appeal to income investors.

Risks and Challenges

Despite the positives, Atmos faces headwinds:
- Operating Costs: Year-to-date operating and maintenance (O&M) expenses rose 16.4% to $233.3 million, driven by higher labor costs and bad debt expenses.
- Regulatory Uncertainty: Ongoing rate cases, including bad debt recovery efforts, could impact profitability.
- Market Volatility: While the stock has gained 16.3% year-to-date, outperforming the S&P 500’s -4.7% decline, macroeconomic pressures could test investor confidence.

Investment Outlook

Atmos Energy’s Zacks Rank #2 (Buy) reflects its strong fundamentals, including a robust balance sheet with $5.3 billion in liquidity and a track record of executing regulatory wins. The company’s focus on safety and infrastructure modernization aligns with long-term growth trends in the utility sector.

Conclusion

Atmos Energy’s Q2 beat and revised guidance underscore its resilience in a challenging environment. With a 14.1% year-over-year rise in operating income and a dividend yield of 2.2%, the stock offers both growth and stability. While risks like rising O&M costs and regulatory hurdles remain, the company’s execution on capital projects and customer growth positions it well to outperform.

Analysts’ consensus for $7.77 EPS in 2026 and its $159.90 average price target suggest a 15.6% upside from current levels. For investors seeking a utility stock with strong fundamentals and dividend growth, Atmos Energy remains a compelling buy.

Final Note: Atmos Energy’s ability to balance regulatory challenges with infrastructure investments and customer expansion will be critical in maintaining its outperformance. Keep an eye on third-quarter results and regulatory outcomes in Texas and Oklahoma for further clues on its trajectory.