ATO or OGS: Which Utility Stock Is a Safer Choice for Investors?

Natural gas distribution pipelines are essential for transporting natural gas via small-diameter pipelines from intrastate and interstate transmission networks to end users. The U.S. natural gas network comprises nearly 3 million mainline and other pipes. The need for distribution pipes is being driven by rising natural gas usage.

Natural gas is increasingly used in power generation due to its relatively cleaner burning characteristics compared to other fossil fuels. The country has witnessed a rise in domestic natural gas production as a result of increased LNG exports and public awareness of lower emissions. The need for additional distribution pipes will increase as demand for natural gas from various consumer segments rises.

In order to repair and maintain a vast network of pipes as well as address aged infrastructure, the natural gas pipeline industry needs a consistent flow of funds. The Fed has lowered the federal fund rate by one percentage point since September 2024, and more rate cuts are anticipated in the second half of 2025. The rate reduction will reduce the utilities’ capital servicing costs and increase their margins and profitability.

Revenues and profitability for utility service providers generally rise steadily. Utilities’ ability to control returns and generate cash flows allows them to make regular dividend payments, which can raise shareholder value.

Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumed to generate electricity in the United States will average 38.4 billion cubic feet per day (Bcf/d) in June, up 26% from May. U.S. natural gas consumption in the electric power sector in May was down 9% from last year, as milder weather kept consumption levels relatively low. In 2025, EIA forecasts overall natural gas consumption in the United States to increase 1% from the prior-year level, averaging 91 Bcf/d. 

In this article, we run a comparative analysis on two Utility - Gas Distribution companies — Atmos Energy ATO and ONE Gas OGS. 

Both stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

How Do Zacks Estimates Compare for ATO & OGS?

The Zacks Consensus Estimate for Atmos Energy’s fiscal 2025 earnings per share (EPS) has increased 0.6% to $7.24 in the past 60 days. 

The Zacks Consensus Estimate for ONE Gas’ 2025 EPS has increased 0.7% to $4.29 in the past 60 days.

ATO & OGS’ Return on Equity

ROE indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, ATO and OGS’ ROE is 9.05% and 8.15%, respectively, compared with the industry’s 9.24%. Here, ROE of ATO is better than that of OGS but marginally lower than the industry average.

Debt Position of ATO & OGS

The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. Atmos Energy and ONE Gas have a debt-to-capital of 39.3% and 40.43%, respectively, compared with the industry’s 50.49%.

ATO & OGS’ Liquidity

A current ratio greater than one indicates that the company has enough short-term assets to liquidate to cover all short-term liabilities, if necessary. The current ratios of ATO and OGS are 1.33 and 0.59, respectively, compared with the industry’s average of 0.63.

ATO & OGS Stock Price Performance

In the past six months, ATO’s shares have risen 11.7% compared with the industry's growth of 2%. Shares of OGS have risen 5.2% in the same time frame.

ATO & OGS’ Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Atmos Energy is 2.23%, while the same for ONE Gas is 3.64%. The dividend yields of both companies are better than the Zacks S&P 500 Composite’s average of 1.25%.

Outcome

Atmos Energy and ONE Gas are both well-positioned stocks that would be wise additions to any portfolio. They have the capacity to significantly enhance their current standing and meet the needs of their expanding customer base. However, our choice at this moment is ATO, given its better debt management, liquidity and price performance than OGS. 

 

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research