ATO or NWN: Which Utility Stock Is Better Positioned for Investors?

Industry Overview - Natural gas is increasingly utilized in power generation due to its cleaner-burning characteristics compared to other fossil fuels, leading to a rise in domestic natural gas output and greater LNG exports [1] - The demand for natural gas across various consumer categories necessitates the installation of more distribution pipelines [1][2] Natural Gas Distribution Infrastructure - The U.S. natural gas network comprises nearly 3 million mainline and other pipes, essential for transporting natural gas from transmission networks to end users [2] - The natural gas pipeline industry requires a consistent flow of funds for the repair and maintenance of its extensive network and to address aging infrastructure [3] Production and Market Trends - According to the U.S. Energy Information Administration, dry natural gas production increased by over 1 billion cubic feet per day from Q1 to Q2 of 2025, but is expected to decline by a similar amount in the following year [4] - Marketed natural gas production is projected to grow by 3% over 2024 volumes [4] Company Comparisons - A comparative analysis of Atmos Energy (ATO) and Northwest Natural (NWN) shows both companies currently hold a Zacks Rank 2 (Buy) [5] - The Zacks Consensus Estimate for ATO's fiscal 2025 EPS has risen by 1% to $7.33, while NWN's EPS estimate increased by 1.4% to $2.92 [6][10] Financial Metrics - ATO's return on equity (ROE) is 9%, while NWN's ROE is 8.6%, compared to the industry average of 9.08% [7] - ATO has a current ratio of 1.37, indicating sufficient short-term assets to cover liabilities, whereas NWN's current ratio is 0.68 [8] - ATO's debt-to-capital ratio stands at 40.21%, significantly lower than NWN's 62.05% and the industry average of 51.09% [11] Stock Performance - In the past month, ATO shares have increased by 7%, outperforming NWN's 2% rise and the industry's 3.9% growth [10][12] - ATO's dividend yield is 2.1%, while NWN's is 4.74%, both exceeding the S&P 500 composite average of 1.15% [14] Conclusion - Both Atmos Energy and Northwest Natural are positioned as strong investment options, with ATO being favored due to its superior debt management, liquidity, and stock performance [15]