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Southwest Gas Upgraded to Strong Buy

Payal Jalan

Zacks Investment Research upgraded Southwest Gas Corporation (SWX) to a Zacks Rank #1 (Strong Buy) on Apr 9, 2013.

Why the Upgrade?

Southwest Gas Corporation impressed all with its fourth quarter and year 2012 results and its increase in quarterly dividend rate, announced on Feb 26 and Feb 27, respectively. Shares since then have grown by 8% as well as the earnings estimate witnessed an upward trend.

The gas utility reported a 17.7% year-over-year increase in its earnings per share in 2012. Revenue increased by 2.2% year over year, driven by healthy performance at the company’s natural gas segment. Growth in revenue was partially offset by an increase in expenses.

Besides the earnings results, Southwest Gas raised its quarterly dividend rate by 11.9% to $0.33 per share. The revised quarterly dividend rate is equivalent to $1.32 per share of annual dividend per share, reflecting a 12% increase over the prior rate of $1.18.
Positive earnings surprise in three out of four trailing quarters, with an average positive earnings surprise of 25.4%, has raised our optimism for better results ahead for Southwest Gas. For 2013 and 2014, we have an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +0.4% and +1.7%, respectively.
Also in the last 60 days, the Zacks Consensus Estimate for 2013 increased by 1.8% to $2.89 while that for 2014 the estimate went up 3.5% to $2.98.

Other Stocks to Consider

Southwest Gas Corporation is a $2.2 billion gas utility operating in Arizona, Nevada, and California. Other stocks to watch out for in the industry are Chesapeake Utilities Corporation (CPK), with a Zacks Rank #1 (Strong Buy) while Atmos Energy Corporation (ATO) and The Laclede Group, Inc. (LG), each has a Zacks Rank #2 (Buy).

Read the Full Research Report on SWX

Read the Full Research Report on CPK

Read the Full Research Report on ATO

Read the Full Research Report on LG

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