Critical Comparison: Northwest Natural Gas (NWN) and Atmos Energy Corporation (NYSE:ATO)

Atmos Energy Corporation (NYSE: ATO) and Northwest Natural Gas (NYSE:NWN) are both utilities companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, dividends, earnings, profitability, valuation, institutional ownership and risk.

Dividends

Atmos Energy Corporation pays an annual dividend of $1.80 per share and has a dividend yield of 2.1%. Northwest Natural Gas pays an annual dividend of $1.88 per share and has a dividend yield of 2.9%. Atmos Energy Corporation pays out 48.1% of its earnings in the form of a dividend. Northwest Natural Gas pays out 85.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Atmos Energy Corporation has raised its dividend for 34 consecutive years and Northwest Natural Gas has raised its dividend for 61 consecutive years. Northwest Natural Gas is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Atmos Energy Corporation and Northwest Natural Gas’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Atmos Energy Corporation $3.62 billion 2.55 $1.04 billion $3.74 23.29
Northwest Natural Gas $754.82 million 2.43 $257.76 million $2.21 29.00

Atmos Energy Corporation has higher revenue and earnings than Northwest Natural Gas. Atmos Energy Corporation is trading at a lower price-to-earnings ratio than Northwest Natural Gas, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Atmos Energy Corporation and Northwest Natural Gas’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Atmos Energy Corporation N/A 10.59% 3.80%
Northwest Natural Gas 8.38% 7.51% 2.08%

Volatility & Risk

Atmos Energy Corporation has a beta of 0.39, meaning that its share price is 61% less volatile than the S&P 500. Comparatively, Northwest Natural Gas has a beta of 0.43, meaning that its share price is 57% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Atmos Energy Corporation and Northwest Natural Gas, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Atmos Energy Corporation 1 0 3 0 2.50
Northwest Natural Gas 0 2 1 0 2.33

Atmos Energy Corporation presently has a consensus target price of $86.25, suggesting a potential downside of 1.00%. Northwest Natural Gas has a consensus target price of $75.00, suggesting a potential upside of 17.00%. Given Northwest Natural Gas’ higher possible upside, analysts plainly believe Northwest Natural Gas is more favorable than Atmos Energy Corporation.

Institutional and Insider Ownership

71.0% of Atmos Energy Corporation shares are held by institutional investors. Comparatively, 63.6% of Northwest Natural Gas shares are held by institutional investors. 1.6% of Atmos Energy Corporation shares are held by insiders. Comparatively, 1.5% of Northwest Natural Gas shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Atmos Energy Corporation beats Northwest Natural Gas on 11 of the 17 factors compared between the two stocks.

Atmos Energy Corporation Company Profile

Atmos Energy Corporation is engaged primarily in the regulated natural gas distribution and pipeline businesses, as well as other nonregulated natural gas businesses. The Company operates through three segments: regulated distribution segment, which includes its regulated distribution and related sales operations; regulated pipeline segment, which includes the pipeline and storage operations of its Atmos Pipeline-Texas Division, and nonregulated segment, which includes its nonregulated natural gas management, nonregulated natural gas transmission, storage and other services. The Company’s nonregulated businesses provide natural gas management, marketing, transportation and storage services to municipalities, local gas distribution companies, including certain of its natural gas distribution divisions and industrial customers principally in the Midwest and Southeast.

Northwest Natural Gas Company Profile

Northwest Natural Gas Company (NW Natural) is engaged in the distribution of natural gas. The Company’s segments include Local Gas Distribution, Gas Storage and other. The Company maintains operations in Oregon, Washington and California and conducts businesses through NW Natural and its subsidiaries. The local gas distribution business, referred to as the utility segment, serves residential, commercial, and industrial customers in Oregon and southwest Washington. The Company’s gas storage business, referred to as the gas storage segment, provides storage services for utilities, gas marketers, electric generators and industrial users from storage facilities located in Oregon and California. The Company’s other segment is referred to as non-utility and consists of non-utility investments and other business activities. The other segment consists of an equity method investment in Trail West Holdings, LLC (TWH) and other pipeline assets in NNG Financial Corporation.

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