Dune Express And Permian Automation Will Fuel Enduring Secular Demand

Key Takeaways

• Expansion of Dune Express and long-term commitments position Atlas to benefit from higher industry activity, margin gains, and increased market share as drilling intensity rises.
  
• Vertical integration, advanced logistics, and sector consolidation support pricing power and revenue growth, while diversification and operational efficiencies enhance cash flow stability.
  
• Reliance on a shrinking customer base, evolving regulations, technological disruption, and costly infrastructure expansion threaten Atlas’s revenue stability, profitability, and long-term competitive position.

Catalysts

Engages in the production, processing, and sale of mesh and sand used as a proppant during the well completion process in the Permian Basin of West Texas and New Mexico.

• The Dune Express is reaching a critical inflection point as it exits the commissioning phase, with management expecting its benefits to be meaningfully reflected in margins and financials throughout the rest of this year. As Dune Express volumes increase, the company indicated each incremental ton delivered is highly accretive, flowing through at incremental margins above 50 percent, which could drive substantial consolidated margin and earnings expansion as U.S. shale activity normalizes.
  
• Atlas has secured long-term volume commitments—22 million tons already allocated for 2025, mainly to large-cap and mid-cap operators utilizing high-intensity frac methods. These customers value Atlas's low-cost, in-basin sand and logistics model, which positions the business to capture market share as drilling and completion intensity rises and operators prioritize efficiency, locking in revenue visibility and providing upside if deferred projects resume.
  
• The increasing adoption of advanced drilling technologies, automation, and higher-intensity completions is structurally raising sand and proppant usage per well in basins like the Permian. Atlas’s vertically integrated in-basin mining, OnCore network, and proprietary logistics platform are uniquely positioned to leverage these trends, enabling sustained revenue and volume growth as industry demand for proppant rises over the coming years.
  
• Integration of Moser Energy Systems expands Atlas’s offering into distributed power solutions, providing immediate positive cash flow and unlocking cross-selling opportunities. Continued investment in next-generation offerings and operational efficiencies is expected to improve returns on invested capital and diversify earnings sources, supporting higher EBITDA and cash flow stability long-term.
  
• Ongoing rationalization in the sand supply sector—caused by industry consolidation and pressure on less efficient operators—is creating a more stable, rational pricing environment with fewer competitors. Atlas’s structural cost and scale advantages mean it is poised to capture share and benefit from improved pricing and higher net margins as the cycle turns, amplifying the earnings power in a recovery.

Atlas Energy Solutions Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Atlas Energy Solutions compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Atlas Energy Solutions's revenue will grow by 7.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.0% today to 14.8% in 3 years time.
• The bullish analysts expect earnings to reach $215.4 million (and earnings per share of $1.67) by about May 2028, up from $34.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 24.6x on those 2028 earnings, down from 45.2x today. This future PE is greater than the current PE for the US Energy Services industry at 10.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.37%, as per the Simply Wall St company report.

Atlas Energy Solutions Future Earnings Per Share Growth

Risks

• Regulatory and investor-driven shifts toward renewable energy and tightening ESG standards threaten long-term demand for Atlas’s core frac sand and logistics business, risking declines in revenue and increased compliance costs negatively impacting net profit margins.
  
• Atlas’s high dependence on a concentrated set of large Permian Basin customers exposes it to the possibility of steep and sustained revenue drops should these key clients reduce drilling or completion activity over time, particularly if the basin’s productivity matures or declines.
  
• Persistent industry oversupply and the emergence of new sand technologies, such as wet sand, direct sourcing, and alternative proppants, could place downward pressure on sand prices and per-well demand, leading to compressed operating margins and reduced long-term earnings.
  
• Expanding infrastructure such as the Dune Express and the integration of Moser Energy Systems require significant capital investment, and if secular demand in oil and gas contracts or basin activity falls, Atlas may face underutilized assets and diminished returns on invested capital, placing pressure on free cash flow and overall profitability.
  
• Increasingly stringent environmental regulations around silica dust and water use are likely to raise operational and compliance costs, eroding Atlas’s competitive advantage and reducing net margins over the long term.

Valuation

• The assumed bullish price target for Atlas Energy Solutions is $28.33, which represents two standard deviations above the consensus price target of $20.67. This valuation is based on what can be assumed as the expectations of Atlas Energy Solutions's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.0, and the most bearish reporting a price target of just $15.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $215.4 million, and it would be trading on a PE ratio of 24.6x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $12.58, the bullish analyst price target of $28.33 is 55.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.