Southwest Gas (SWX) Down 8.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Southwest Gas (SWX). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Southwest Gas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Southwest Gas Q2 Earnings & Revenues Outpace Estimates
Southwest Gas Holdings Inc. recorded second-quarter 2023 operating earnings of 47 cents per share, which beat the Zacks Consensus Estimate of 39 cents by 20.5%. The bottom line increased 104.3% from the year-ago quarter’s 23 cents.
GAAP earnings were 40 cents per share against a loss of 10 cents in the prior-year period.
Total Revenues
Operating revenues totaled $1,293.6 million in the quarter, which outpaced the Zacks Consensus Estimate of $1,119 million by 15.6%. The top line improved 12.9% from $1,146.1 million in the prior-year quarter.
Highlights of the Release
Total operating expenses were $1,208.9 million, up 9.9% from $1,100.5 million in the comparable period of 2022. This increase was due to a hike in the net cost of gas sold and utility infrastructure services expenses.
Total operating income amounted to $84.8 million, up 85.7% from the year-ago quarter’s $45.7 million.
Financial Highlights
Cash and cash equivalents, as of Jun 30, 2023, were $221.4 million compared with $123.1 million as of Dec 31, 2022.
The long-term debt, less current maturities, amounted to $5,284.8 million as of Jun 30, 2023, compared with $4,403.3 million as of Dec 31, 2022.
Southwest Gas’ net cash provided by operating activities for the six months ended Jun 30, 2023 was $12.2 million compared with $263.6 million cash provided in the year-ago period.
2023 Guidance
Natural Gas Distribution segment capital expenditure guidance was increased to $700-$720 million from $665-$685 million to support customer growth, system improvements and pipe replacement programs.
For 2023-2025, capital expenditure is expected to be $2 billion. The segment predicts net income in the range of $205-$215 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -100% due to these changes.
VGM Scores
At this time, Southwest Gas has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Southwest Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Southwest Gas belongs to the Zacks Utility - Gas Distribution industry. Another stock from the same industry, UGI (UGI), has gained 0.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
UGI reported revenues of $1.66 billion in the last reported quarter, representing a year-over-year change of -18.4%. EPS of $0 for the same period compares with $0.06 a year ago.
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