Zacks Industry Outlook Highlights Atmos Energy, New Jersey Resources and MDU Resources

For Immediate ReleaseChicago, IL – January 10, 2025 – Today, Zacks Equity Research discusses Atmos Energy Corp. ATO, New Jersey Resources NJR and MDU Resources Group MDU.Industry: Natural GasLink: https://www.zacks.com/commentary/2394267/3-gas-distribution-stocks-to-watch-from-a-flourishing-industryNatural gas distribution companies offer services to transport natural gas from the region of production to millions of consumers across the United States. The utilities under the Zacks Utility Gas Distribution industry control miles of underground pipeline network to provide natural gas services to customers. The rising demand for clean, burning natural gas will create more opportunities for natural gas distribution companies.Atmos Energy Corp., with its widespread transmission and distribution lines, interstate pipelines and significant investments in infrastructure development projects, is poised to benefit as natural gas production volumes are expected to increase in 2025. Steady investments and expanding infrastructure in crucial production regions should drive the performance of New Jersey Resources and MDU Resources Group.About the IndustryThe shale revolution has substantially increased natural gas production. Its clean-burning nature has steadily boosted the demand for natural gas from all customer groups. Natural gas distribution pipelines are vital in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The United States has 3,353 trillion cubic feet of natural gas, and a natural gas pipeline network of 2.6 million miles is utilized to distribute gas to customers.Major concerns for the industry are aging infrastructure and rising investment costs required to upgrade and maintain the vast network of pipelines due to the hike in interest rates. Competition from other clean energy sources can lower the demand for natural gas and, consequently, for pipelines.3 Factors Shaping the Future of the Gas Distribution IndustryInterest Rate Decline is a Tailwind: To maintain, upgrade and expand operations, utilities approach capital markets for loans. Multiple rate hikes by the Federal Reserve took the benchmark rate to the 5.25-5.50% range, adversely impacting utility operators. The U.S. Federal Reserve has finally lowered the benchmark rate by 100 basis points, bringing down rates to a range of 4.25-4.5%.More rate cuts are expected in 2025, and the capital-intensive domestic-focused utilities will benefit from the Fed's decision to reduce interest rates. The drop in interest rates is a big positive for utility operators planning large investments in infrastructure upgrades.Production and Export Volumes of Increase: The short-term energy outlook released by the U.S. Energy Information Administration (EIA) indicates that domestic dry natural gas production in 2025 will be higher than 2024 levels due to an increase in production volume in the Permian and Eagle Ford regions. EIA expects U.S. liquefied natural gas (LNG) export volumes in 2025 to improve by 16.7% year-over-year. So, the gas pipelines will have to play a crucial role in transporting natural gas to these export terminals.Fresh Investments Create Opportunities: The clean-burning nature and wide availability of natural gas across the United States are driving demand. At present, 187 million Americans use natural gas. The distribution network will continue to transport natural gas to all parts of the United States.With five new LNG export terminals being developed in the United States, there should be increased demand for natural gas pipeline services to transfer the gas from production areas to these terminals. Per EIA, once completed, the five new LNG projects will increase the combined export capacity by 9.7 Bcf/d by 2025. Per EIA, LNG export capacity is on track to more than double between 2024 and 2028, from 11.4 billion cubic feet per day (Bcf/d) in 2023 to 24.4 Bcf/d in 2028 if the projects start operating as per plan.Per the American Gas Association report, one residential customer signs up for natural gas service every minute, and 80 businesses add natural gas service each day. Per the report, natural gas utilities are investing $33 billion each year to increase the reliability of natural gas distribution and transmission systems, indicating the long-term growth potential of this space.Zacks Industry Rank Indicates Strong ProspectsThe group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. The Zacks Utility Gas Distribution industry — a 13-stock group within the broader Zacks Utilities sector — currently carries a Zacks Industry Rank #91, which places it in the top 36% of the 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.The industry's positioning in the top 50% of the Zacks-ranked industries results from a positive earnings outlook for the constituent companies in aggregate.Before we present a few Gas Distribution stocks that you may want to consider for your portfolio, let us look at the industry's recent stock-market performance and valuation picture.Gas Distribution Industry Beats Sector but Lags S&P 500The Gas Distribution industry has underperformed the Zacks S&P 500 composite but outperformed its sector over the past year. The stocks in this industry have gained 18.9% in the said time frame compared with the Utility sector's growth of 12.9%. The Zacks S&P 500 composite has gained 26.5% in the same time frame.Gas Distribution Industry Trading at a DiscountSince utility companies have a lot of debt on their balance sheets, the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio is commonly used to value them.The industry is trading at a trailing 12-month EV/EBITDA of 11.17X compared with the S&P 500's 18.46X and the sector's 14.89X. Over the past five years, the industry has traded at a high of 14.52X and a low of 9.1X, with a median of 10.32X.Gas Distribution Stocks to WatchAll three natural gas distribution stocks mentioned below currently carry a Zacks Rank #2 (Buy) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Atmos Energy: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy invested $2.94 billion in fiscal 2024 and plans to invest $3.7 billion in fiscal 2025 to strengthen its infrastructure further and efficiently serve more customers. Courtesy of its widespread pipeline, the company can transport more than 8.4 billion cubic feet of renewable natural gas annually. It continues to replace old pipelines and provide reliable services to its expanding customer base.The current dividend yield is 2.55%, better than the Zacks S&P 500 Composite's yield of 1.57%. The Zacks Consensus Estimate for ATO's fiscal 2025 and 2026 earnings has moved up 0.4% and 0.8%, respectively, over the past 90 days.New Jersey Resources: This Wall, NJ-based company provides reliable energy services to its expanding customer base. Given its earnings growth opportunities and strong return on equity, NJR makes for a solid investment option in the utility sector. New Jersey Resources makes consistent investments to upgrade and maintain its existing infrastructure. The company expects capital expenditures in the range of $495-$675 million for fiscal 2025.The current dividend yield is 3.94%. The Zacks Consensus Estimate for NJR's fiscal 2025 and 2026 earnings has moved 7.3% and 2.9% higher, respectively, over the past 90 days.MDU Resources: This Bismarck, ND-based company provides value-added natural resource products and related services to its customers. The company spun off its construction materials subsidiary, Knife River Corporation, and focuses solely on its energy delivery business. The company planned $2.7 billion in capital investments in the 2024-2028 period to strengthen its gas distribution operations further.The current dividend yield is 2.89%. The Zacks Consensus Estimate for MDU's 2024 and 2025 earnings per share has moved up 0.9% and 1.1%, respectively, in the past 60 days.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Atmos Energy Corporation (ATO): Free Stock Analysis Report MDU Resources Group, Inc. (MDU): Free Stock Analysis Report NewJersey Resources Corporation (NJR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks