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Southwest Gas Corporation (SWX - Snapshot Report) reported second-quarter 2013 pro forma earnings per share of 22 cents, beating the Zacks Consensus Estimate by 15 cents. Quarterly earnings increased substantially from the prior-year loss of 8 cents per share.

The improvement in earnings was primarily driven by a rise in revenues, higher contribution from the company’s subsidiary NPL Construction Co., a decline in interest expenses and higher income from the company-owned life insurance.


In the quarter under review, Southwest Gas’ total revenues were $411.6 million, missing the Zacks Consensus Estimate by $11.4 million.

However, quarterly revenues increased 0.4% year over year due to higher sales at the company’s Construction Services segment; partially offset by lower Natural Gas Operations’ revenues.

Operational Update

Southwest Gas’ total operating expenses were $382.7 million, down 3% year over year mainly due to a decline in net cost of gas sold. The decline in operating expenses was partially offset by an increase in operations and maintenance, depreciation and amortization expenses, and higher construction expenses and taxes (other than income taxes) and more than offset by an increase in revenues.

In the reported quarter, operating margin increased to 7% from 3.8% in the year-ago quarter.

Southwest Gas’ net interest deductions totaled $15.3 million, down 16.4% year over year.

Financial Update

As of Jun 30, 2013, Southwest Gas’ cash balance was $17.7 million versus $25.5 million as of Dec 31, 2012.

Long-term debt (less current maturities) as of Jun 30, 2013 was $1,256.3 million versus $1,268.4 million as of Dec 31, 2012.

Southwest Gas’ net cash provided by operating activities during the first six months of 2013 was $215.2 million compared with $261.5 million in the prior-year comparable period.

In the first six months of 2013, the company's capital expenditure was $152 million compared with $176.4 million in the year-ago period.

Other Company Releases

AGL Resources Inc.’s (GAS - Analyst Report) second-quarter 2013 pro forma earnings per share of 41 cents beat the Zacks Consensus Estimate by 14 cents.

MDU Resources Group Inc. (MDU - Snapshot Report) announced second-quarter 2013 operating earnings of 25 cents per share, missing the Zacks Consensus Estimate by a penny.

Questar Corporation (STR - Analyst Report) reported second-quarter 2013 earnings per share of 22 cents, in line with the Zacks Consensus Estimate.

Our Take

It is evident from the last quarter that Southwest Gas is in the process of adding new customers. In the second quarter of 2013, the company recorded an additional $2 million in its operating margin by virtue of adding roughly 24,000 new customers during the last twelve months. We believe continuous growth in customer headcounts will help the company to improve its future performance.

Las Vegas-based Southwest Gas is engaged in purchasing, distributing and transporting natural gas in Arizona, Nevada and California. The company currently has a Zacks Rank #4 (Sell).

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