Southwest Gas (SWX) to Separate Centuri Through IPO in 2024
Southwest Gas Holdings Inc. SWX continues with its plans to separate its utility infrastructure services business Centuri through an initial public offering (IPO) next year.
SWX announced the spinoff of Centuri in March 2022, while being engaged in a legal dispute with activist investor Carl Icahn regarding the acquisition of MountainWest Pipelines, which it ultimately sold.
Benefits of the Separation
This separation will help the company in maximizing value for investors and improving value transparency by means of a more direct comparison with competitors in the pure-play business. The increased strategic adaptability and efficiency in capital allocation depend on the unique goals and objectives of each company.
Strong financial profiles that precisely reflect each company's strengths and opportunities will be able to fund their operations more effectively while giving investors a more targeted investment opportunity.
The company will have the ability to significantly lower its future equity financing requirements. Southwest Gas will have access to different and growing markets and unique customer profiles with increased potential for customer acquisition and organic growth.
SWX maintains its strategic flexibility to separate Centuri through a tax-free spin-off of all or part of Centuri in the event that Southwest Gas decides not to go public or the market is not favorable for an IPO.
Price Performance
In the past six months, shares of Southwest Gas have risen 0.3% against the industry’s 5.7% decline.
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Zacks Rank & Other Stocks to Consider
Southwest Gas currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks from the same sector are Sempra Energy SRE, IDACORP IDA and NRG Energy NRG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
SRE’s long-term (three to five years) earnings growth rate is 4.95%. The company delivered an average earnings surprise of 9% in the last four quarters.
IDA’s long-term earnings growth rate is 4.11%. The company delivered an average earnings surprise of 13.3% in the last four quarters.
The Zacks Consensus Estimate for NRG’s 2023 earnings implies a year-over-year increase of 73.3%. The company delivered an average earnings surprise of 4.7% in the last four quarters.
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