Atmos Energy’s Q3 2026 Call: APT Contribution, O&M Drivers, and Texas Rule Benefits Spark Contradictions

Date of Call: Aug 6, 2026

Financials Results

• EPS: $7.33 per diluted share, up 14.5% YOY for first nine months

Guidance:

• Reaffirmed fiscal 2026 EPS guidance in the range of $8.40 to $8.50.
• Capital expenditures for fiscal 2026 expected to be approximately $4.2 billion.
• Fiscal 2026 O&M, excluding bad debt expense, expected to be in the range of $875 million to $885 million.

Business Commentary:

Financial Performance and Guidance:

• Atmos Energy reported year-to-date fiscal 2026 net income of $1.2 billion, or $7.33 per diluted share, and reaffirmed their earnings per share guidance in the range of $8.40 to $8.50.
• The financial performance was bolstered by residential and commercial customer growth, increased customer load, and impacts from Texas House Bill 4384, while narrower spreads in the latter half of the third quarter due to additional takeaway capacity were noted.

Capital Expenditure and Infrastructure Investment:

• The company's capital expenditures for the fiscal year totaled $3.1 billion, with over 87% directed towards enhancing the safety and reliability of their distribution, transmission, and underground storage systems.
• This investment focus is driven by the need to support steady, diversified customer growth and to improve system reliability and capacity, particularly with projects like the installation of 36-inch pipeline miles to connect compressor stations and enhance capacity in Texas.

Customer Growth and Economic Development:

• Across their service territories, Atmos Energy added nearly 51,000 new customers over the 12 months ending June 30, 2026, with 39,000 located in Texas, including 600 commercial customers in the third quarter and 12 new industrial customers year-to-date.
• This growth is indicative of the role natural gas plays in economic development, supported by Texas's job growth and the addition of Fortune 500 companies, which necessitates enhanced system capacity and reliability.

Regulatory and Operational Updates:

• Atmos Energy's APT division is working on several projects to enhance system reliability, including the installation of 29 miles of 36-inch pipeline and a bilateral compressor station in Texas.
• These efforts are aimed at supporting growth in the DFW Metroplex and are scheduled to be completed by the end of the calendar year, with additional regulatory filings seeking revenue credits for LDC customers.

O&M and Cost Management:

• Fiscal 2026 O&M spending is expected to be in the range of $875 million to $885 million, reflecting higher spending due to employee compliance, safety-related initiatives, and maintenance, offset by the implementation of House Bill 4384 deferrals.
• The company anticipates a 4% annual increase in O&M costs per year as part of their five-year guidance, with ongoing activities like line locates and compliance driving the current fiscal year's costs.

Sentiment Analysis:

Overall Tone: Positive

• Management reaffirmed full-year EPS guidance, citing 'strong year-to-date performance' and 'continued demand from all customer classes.' They highlighted 'steady, diversified customer growth,' new industrial customers equivalent to 18,000 residential users, and projects enhancing system reliability and capacity. The tone was confident in operational execution and future growth.

Q&A:

• Question from Constantine Ledniff (Wells Fargo Securities): Given we are a quarter short of the year, do you anticipate to be in the top end of guidance? Do you anticipate any offsets to the strong year-to-date performance in 4Q? And maybe just a quick question around APT. Given where WAHA has been trading, are contributions still moving in the same direction, or do you anticipate some narrowing?
  Response: Reaffirmed $8.40-$8.50 EPS guidance; spreads have narrowed significantly due to additional takeaway capacity coming online earlier than expected, impacting APT contributions, but the full-year range remains unchanged.

• Question from Richard Sunderland (Truist Securities): Just last quarter i think it was an 8 to 12 cent range for 2h uptick you guys had spoken to looks like you captured most of that this quarter but it is 8 to 12 cents still the right range to be thinking about um you know over that period meaning for the the balance of the year on 4q
  Response: Expect APT's contribution for the remainder of the year to be at the lower end of the 8-12 cent range, influenced by spread tightening and operational factors.

• Question from Julian Dumoulin-Smith (Jefferies): Just given the benefits we've seen of late, can we expect it to, like, maybe remain a discrete earnings benefit in 27, or does it increasingly roll into Texas recovery from here?
  Response: After the step-year change in fiscal 2026, future year-over-year impacts from Rule 7-7-102 are expected to moderate, aligning more with historical Rule 8209 patterns, supporting 6-8% EPS growth off the current range.

• Question from Dylan Lipner (Mizuho): With Waha now back in positive territory and additional takeaway capacity expected to come online over the next several quarters, how are you guys thinking about how this is going to impact APT's earning power and utilization in the near term?
  Response: Expect APT contributions to be at the lower end of the 8-12 cent range for the year; will continue budgeting the benchmark and monitor conditions heading into the heating season.

Contradiction Point 1

APT Contribution Forecast for Q4

Reiterated guidance for APT contribution is lowered in the latest call.

Dylan Lipner (Mizuho) - Dylan Lipner (Mizuho)

2026Q3: The company reiterates its previous guidance that the expected APT contribution for the balance of fiscal 2026 is at the lower end of the 8–12 cent range. - Chris Forsythe(CFO)

How will Waha's return to positive territory and upcoming additional takeaway capacity impact APT's near-term earning power and utilization? - Richard Sunderland (Truist Securities)

2026Q3: The company now expects APT's contribution for the fourth quarter to be at the lower end of the previous $0.08-$0.12 range. - Kevin Akers(CFO)

Contradiction Point 2

Drivers of Increased O&M Forecast

The reason for the O&M forecast increase is clarified as not being a pull-forward from 2027.

Richard Sunderland (Truist Securities) - Richard Sunderland (Truist Securities)

2026Q3: The increased O&M forecast for fiscal 2026 (now a range of $875–$885 million) is due to typical seasonal activities such as line locates and compliance/maintenance work related to customer growth across the service territories, not because of significant activities being pulled forward from fiscal 2027. - Chris Forsythe(CFO)

Does the $10 million low-end estimate reflect activities pulled forward from 2027 or external drivers like line locates? - Richard Sunderland (Truist Securities)

2026Q3: The increase in the O&M range is due to ongoing, typical seasonal activities related to customer growth, line locates, and compliance/maintenance work across the service territories, not a shift of major activities from 2027. - Kevin Akers(CFO)

Contradiction Point 3

APT Contribution Expectations

Contradiction on expected APT contribution range for the fiscal year.

What was Richard Sunderland's (Truist Securities) question during the earnings call? - Richard Sunderland (Truist Securities)

2026Q3: The expected APT contribution for the balance of fiscal 2026 is now at the lower end of the previous 8–12 cent range. - Chris Forsythe(CFO)

Is the 8 to 12 cent range still the right expectation for the balance of the year, including Q4, given the 2H uptick? - Ryan Levine (Citi)

2026Q2: For the second half of fiscal 2026, they anticipate an additional $0.08-$0.12, which includes recent activity like April. - Chris Forsythe(CFO)

Contradiction Point 4

Texas Rule 7-7-102 Earnings Benefit Trajectory

Contradiction on how the earnings benefit from the Texas rulemaking will progress beyond fiscal 2026.

Julian Dumoulin-Smith (Jefferies) - Julian Dumoulin-Smith (Jefferies)

2026Q3: Fiscal 2026 is a 'step year' for the impact of Texas Rule 7-7-102. Going forward, the year-over-year earnings growth benefit is expected to moderate and align more closely with historical Rule 8209 patterns. - Chris Forsythe(CFO)

Will the recent benefit remain a discrete earnings item in 2027 or increasingly integrate into Texas recovery? - Aditya Darshan Gandhi (Wolfe Research)

2026Q2: This fiscal year is a 'rebasing' year... Going forward, the impact is factored into the 5%-8% growth guidance, and the company expects a more 'steady state' without another rebasing in fiscal 2027. - Chris Forsythe(CFO)

Contradiction Point 5

APT's Expected Contribution and Benefit Ranges

Guidance for APT's earnings contribution shifted from a broad range to a specific lower end.

Richard Sunderland (Truist Securities) - Richard Sunderland (Truist Securities)

2026Q3: The expected APT contribution for the balance of fiscal 2026 is now at the lower end of the previous 8–12 cent range. - Chris Forsythe(CFO)

Is the 8-12 cent range for the 2H uptick still the right guidance for the remainder of the year? - Julien Dumoulin-Smith (Jefferies LLC)

2026Q1: The $35 million impact... will vary based on spending timing and operational activity. It would be 'dangerous' to assume a simple run-rate (e.g., $35M x 4)... - Christopher Forsythe(CFO)