Inflation-Linked Stocks: Atmos Energy, ONE Gas, American Water Works

The Facts -

• High rates and inflation affect U.S. infrastructure stocks.
• Atmos Energy leverages regulation for earnings growth.
• ONE Gas and American Water Works focus on inflation-linked returns.

---

Amid rising interest rates and the Federal Reserve's cautious stance on easing, investors are re-evaluating the resilience of various sectors. Concerns about inflation and its impact on consumer demand, oil prices, and AI-related costs are reshaping priorities. This article delves into how these dynamics are affecting U.S. Inflation-Linked and Regulated Infrastructure stocks, spotlighting three companies potentially poised to benefit from such shifts.

In the realm of inflation-resistant investments, a group of U.S. inflation-linked and regulated infrastructure companies stands out. While this article focuses on three notable companies, a broader list reveals 15 more entities with similar compelling investment narratives. To explore these high-conviction ideas further, you can access the U.S. Inflation-Linked and Regulated Infrastructure screener.

Atmos Energy

Overview: Atmos Energy, a major player in the U.S. natural gas sector, operates across eight states, providing distribution, transportation, and storage services.

Operations: The company earns approximately $4.6 billion from Distribution and $1.2 billion from Pipeline and Storage within the United States.

Market Cap: Valued at $27.4 billion, Atmos Energy aligns with inflation-linked, regulated infrastructure themes. Its business model, centered on state-approved returns and cost recovery, offers stability in a high-interest environment.

"Recent legislation in Texas (HB4384), which expands the eligibility of deferred regulatory asset treatment to approximately 80% of Atmos' total capital spending (from 45%), will allow for faster rate recovery on a larger portion of investments, directly supporting higher earnings growth and improving net margins in coming years."

Investors focus on Atmos Energy's funding and payout sustainability, crucial factors affecting returns. Delving into the full narrative for Atmos Energy provides insights into how regulation and payout strategies might evolve.

ONE Gas

Overview: ONE Gas, serving about 2.3 million customers across Oklahoma, Kansas, and Texas, epitomizes the inflation-pass-through utility theme as a regulated natural gas distributor.

Operations: Generating approximately $2.3 billion exclusively from Regulated Public Utilities in the U.S., ONE Gas maintains a streamlined business model.

Market Cap: With a market cap of $4.8 billion, ONE Gas offers pure-play exposure to regulated gas infrastructure in the U.S., where cost recovery and inflation-linked clauses reinforce its investment appeal in a prolonged high-rate landscape.

"Favorable regulatory developments, particularly Texas House Bill 4384, enable full recovery of capital expenditures and reduce regulatory lag, which is anticipated to drive higher earnings and more predictable net profit margins in the coming years."

Uncertainties surrounding funding and rate-setting pressures could influence ONE Gas' future margins. The full narrative for ONE Gas explores whether capital needs are affecting the company's potential growth.

American Water Works Company

Overview: American Water Works Company is the leading U.S. regulated water and wastewater utility, serving approximately 3.6 million customers across 14 states.

Operations: The company generates around $4.9 billion from Regulated Businesses and an additional $409 million from other activities within the U.S.

Market Cap: With a market value of $27.5 billion, American Water Works Company exemplifies the inflation-linked theme, influenced by regulatory decisions amid rising costs and infrastructure investments.

"Heightened regulatory and societal focus on water quality and infrastructure modernization is associated with faster rate case approvals and higher capital investment (for example, $3.3 billion capital spend in 2025 and requests for $111 million cumulative rate increases in CA by 2029). These factors can result in more predictable, inflation-linked rate adjustments and may support ongoing earnings expansion."

The future of American Water Works Company's margins will hinge on evolving funding conditions and rate approval developments. To understand the impact of regulatory momentum, the full narrative for American Water Works Company provides detailed analysis.

Seeking Alternatives Before The Crowd?

As attention centers on traditional tickers, new investment themes are emerging. Early exploration of these opportunities could be key, as market momentum can shift rapidly and often unnoticed.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

---
Read More USA Works News