On Dec 31, 2013, shares of Southwest Gas Corporation (SWX) hit a 52-week high of $56.03, finally closing at $55.91, reflecting a gain of 35.3% over the 12-month period.
The increase in share price is a testament of the solid performance by the company over the last nine months. Southwest Gas Corporation registered positive earnings surprises in the last three quarters, with an average beat of 45.44%.
In October, Southwest Gas took advantage of the prevailing market condition to issue new debts worth $250 million, bearing interest at a rate of 4.875% per annum. The net proceeds enabled the company to repay its outstanding dues of $180 million under its revolving credit facility. This will increase the total liquidity of the company.
The Zacks Consensus Estimate for 2013 increased 1.7% in the last 90 days to $3.00 per share reflecting a year-over-year rise of 10.22%. The 2014 consensus also increased 0.7% to $3.06 in the last 90 days reflecting year-over-year growth of 2.07%. We expect long-term earnings growth of 3.37%
True to the defensive nature of the utility stocks, the company has been distributing dividend on a regular basis for the past 57 years. The company has been increasing dividend over the last seven years. The current annual dividend rate of $1.32 per share reflects a dividend yield of 2.36%, marginally higher than the industry average of 2.33%.
The present valuation of the company looks reasonable. The forward P/E multiple of the company is 18.27% reflecting a discount of 0.9% from its peer group average of 18.44%. Price-to-book of the company is 1.90%, 15.5% lower than its peer group average of 2.25%. Return on equity of the company is 10.0%, marginally higher than the peer group average of 10.3%.
Southwest Gas Corporation currently has a Zacks Rank # (Hold). Some better-ranked stocks in the same sector include AGL Resources Inc. (GAS), MDU Resources Group Inc. (MDU) and Questar Corporation (STR). All these stocks hold a Zacks Rank #2 (Buy).