Southwest Gas (SWX) Up 5.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Southwest Gas (SWX). Shares have added about 5.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Southwest Gas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Southwest Gas Q3 Earnings & Revenues Beat Estimates
Southwest Gas Holdings Inc. recorded third-quarter 2023 operating earnings of 10 cents per share, which beat the Zacks Consensus Estimate of 2 cents by 400%. The company reported a loss of 5 cents per share in the year-ago quarter.
GAAP earnings came in at 4 cents per share against a loss of 10 cents in the prior-year period.
Total Revenues
Operating revenues totaled $1,169.5 million in the quarter, which outpaced the Zacks Consensus Estimate of $1,064 million by 9.9%. The top line improved 3.9% from $1,125.6 million in the prior-year quarter.
Highlights of the Release
Total operating expenses were $1,109.3 million, up 3.1% from $1,075.7 million in the comparable period of 2022. This increase was due to a hike in the net cost of gas sold and utility infrastructure service expenses.
Total operating income was $60.2 million, up 20.4% from the year-ago quarter’s level of $50 million.
The company continues to gain from solid customer additions. Total system throughput in the first nine months of 2023 was 175.6 million dekatherms, up 6.7% from the year-ago quarter's level.
Financial Highlights
Cash and cash equivalents, as of Sep 30, 2023, were $104.9 million compared with $123.1 million as of Dec 31, 2022.
The long-term debt, less current maturities, amounted to $5,235.5 million as of Sep 30, 2023, compared with $4,403.3 million as of Dec 31, 2022.
Southwest Gas’ net cash provided by operating activities for the nine months ended Sep 30, 2023, was $198.4 million compared with $303.3 million in the year-ago period.
2023 Guidance
The capital expenditure guidance for the Natural Gas Distribution segment has been increased to $720-$740 million from the previously predicted band of $700-$720 million. This was primarily driven by greater-than-expected customer growth, as well as system improvements and pipe replacement programs to enhance safety and reliability. Guidance for the segment’s net income in 2023 was raised to $215-$225 million from the previously predicted band of $205-$215 million.
Capital expenditure is expected to be $2 billion for 2023-2025. Three-year rate base CAGR is projected to be in the range of 5-7%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Southwest Gas has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Southwest Gas has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Southwest Gas is part of the Zacks Utility - Gas Distribution industry. Over the past month, MDU Resources (MDU), a stock from the same industry, has gained 5.7%. The company reported its results for the quarter ended September 2023 more than a month ago.
MDU Resources reported revenues of $1 billion in the last reported quarter, representing a year-over-year change of -49.4%. EPS of $0.29 for the same period compares with $0.75 a year ago.
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