Southwest Gas Holdings Raises 2024 Net Income Guidance

Southwest Gas Holdings Inc. (NYSE: SWX) has announced an uptick in its utility operating margin and has raised its net income guidance for 2024 by $5 million. During a recent earnings call, the company provided insights into its financial performance for the second quarter of 2024, its strategic initiatives, and its robust financial position.

The company successfully completed its Centuri IPO and is advancing its long-term growth strategy, which includes a forthcoming rate case filing in California. Southwest Gas anticipates a compound annual growth rate of 6.5% to 7.5% and has reaffirmed its capital expenditure forecast.

### Key Takeaways
– Southwest Gas Holdings finalized the Centuri IPO and is set to file a rate case in California.
– The utility’s operating margin saw a year-over-year increase of nearly $11 million, largely attributed to improved investment recovery in Nevada and customer growth.
– Operating and maintenance costs rose by $4.9 million, mainly due to higher labor and insurance expenses.
– The 2024 utility net income guidance has been raised by $5 million, reaffirming a rate-based CAGR of 6.5% to 7.5%.
– The company maintains a strong balance sheet with cash reserves of $600 million and minimal debt financing needs through 2026.

### Company Outlook
– An increase in 2024 utility net income guidance by $5 million has been issued.
– The company is committed to maintaining a strong balance sheet and enhancing shareholder value.
– Southwest Gas is exploring options for Centuri’s separation and aims to appoint a permanent CEO soon.
– After the IPO, the firm adjusted its financing plan and reaffirmed its utility capital expenditure forecast.

### Bearish Highlights
– The reduction in regulatory account amortization offset some of the increases in operating margin.
– Operating and maintenance costs increased due to rising labor and insurance expenses.

### Bullish Highlights
– The successful Centuri IPO strengthens the company’s strategic position.
– A strong balance sheet and substantial cash balance provide financial flexibility.
– Limited equity and debt financing needs will allow for continued execution of strategic initiatives.

### Misses
– A drag of $0.09 from the holding company was primarily due to year-over-year financing comparisons.

### Q&A Highlights
– Southwest Gas Holdings plans to appoint a new CEO in the near term.
– The company discussed an ATM offering of $340 million to provide flexibility in capital raising.
– It was clarified that market conditions might influence whether they need to go to market for additional financing based on cash flow and potential Centuri shares sale.
– The company outlined minimal equity requirements, with less than $75 million needed this year and $150 million over the next two years.

Overall, Southwest Gas Holdings has demonstrated a consistent commitment to returning value to shareholders through its reliable dividend record, maintaining payments for over half a century and raising dividends for 17 consecutive years. The firm currently has a price-to-earnings ratio of 26.02, which suggests potential attractiveness for value-focused investors.

Despite a slight increase in revenue of 2.19% over the past year, the company encountered a minor contraction of -1.39% in quarterly revenue growth in Q1 2024. Yet, its ability to navigate economic fluctuations remains promising.

The company is on the right track to execute its strategic priorities and remains optimistic about achieving continued organic growth and enhancing value for its shareholders as a leading natural gas utility.