Southwest Gas Corp.

Southwest Gas Corporation (SWX - Snapshot Report) surpassed the Zacks Consensus Estimate by a solid 85.2% in the third quarter, marking the fourth straight quarter with a positive earnings surprise for this natural gas operator. A healthy dividend yield of 2.8% and an expected long-term earnings growth rate of about 5.0% make this Zacks #2 Rank (Buy) suitable for investors seeking both growth and income.

Strong Quarter

On November 6, Southwest Gas Corporation reported a third quarter loss per share of 4 cents, which was much narrower than the year-ago loss of 20 cents. The result was 85.2% better than the Zacks Consensus Estimate at a loss of 27 cents.

Total revenue grew 5.4% year over year to $371.8 million, riding primarily on the addition of 22,000 new customers in the last twelve months.

Operating expenses increased 4% to $365.5 million. The increase in general and employee-related costs, including pension expense, and increases in depreciation due to usage of additional plants led to the rise in expenses.

Rising Earnings Estimates

The Zacks Consensus Estimate for this year has climbed 2.3% in the past month to $2.72 per share, while the Zacks Consensus Estimate for 2013 moved up 0.4% to $2.84.

Consistent Dividend

Southwest Gas Corporation has been consistently paying dividends since it went public in 1956. The company has steadily increased the annual dividend rate in the last six years. Its quarterly dividend was raised by 11.3% to 29.5 cents in February 2012 from the prior payout of 26.5 cents. The current annualized rate of $1.18 reflects a yield of 2.8%.

Attractive Valuation

Shares of Southwest Gas Corporation are roughly trading at 15.2 times 12-month forward earnings, a 2.6% discount to the peer group average of 15.6%. The price-to-book is at 1.51x, a 15.6% discount to the peer group average of 1.79x. The price-to-sales is at 0.97x, a 4.9% discount to the peer group average of 1.02x.

The company has a trailing 12-month ROE of 10.8%, almost in line with the peer group average.

The chart below echoes a similar bullishness with earnings estimates showing an uptrend. The price is expected to continue moving along with earnings estimates.

Based in Las Vegas, Nevada, Southwest Gas Corporation was founded in 1931. The company supplies natural gas to 1.8 million customers scattered in Arizona, Nevada, and California. The market capital of this company is $1.9 billion and it has 5,754 employees. The company competes with NV Energy Inc. (NVE), among others.

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