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NFG or SWX: Which Utility Gas Distribution Stock to Hold Now?

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Natural Gas pipelines operators play a crucial role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small diameter distribution pipelines. Notably, the natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the United States and internationally is driving demand for distribution pipelines.

Awareness about lower emissions as well as higher volume of exports have boosted domestic natural gas production in the United States. Per the U.S. Energy Information Administration, this year, between January and early July, 5 billion cubic feet per day (Bcf/d) of new pipeline capacity entered service in the United States.  These new pipeline projects could increase deliverability to growing natural gas demand markets in North America.

The pandemic has no doubt delayed some of the natural gas pipeline projects in the United States as the pipeline operators preferred to wait as the fall in demand for hydrocarbon also lowered demand for midstream services. However, with economic activities starting to revive and possibility of a vaccine in near future, demand for hydrocarbon and midstream services is expected to rise.

In this article, we run a comparative analysis on two Utility - Gas Distribution companies — National Fuel Gas Company (NFG - Free Report)    and Southwest Gas Holdings Inc. (SWX - Free Report) — to decide which stock is worth retaining in your portfolio now.

Both the stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

National Fuel Gas has a market capitalization of $3.71 billion, while the same for Southwest Gas Holdings is $3.73 billion. Both companies currently have a VGM Score of B.

Growth Projections

The Zacks Consensus Estimate for National Fuel Gas’ fiscal 2021 earnings is pegged at $3.75 on revenues of $2.02 billion. This indicates 28.42% growth in the bottom line and 30.66% increase in the top line from the year-ago reported figures.

The Zacks Consensus Estimate for Southwest Gas’ 2020 earnings is pegged at $3.89 on revenues of $3.25 billion. This suggests 1.27% decrease in the bottom line and 4.03% increase of the top line from the year-ago reported figures.

Debt-to-Capital

The debt-to-capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Southwest Gas and National Fuel Gas have a debt-to-capital of 51.6% and 57.15%, respectively, compared with the industry’s 50.02%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield for Southwest Gas is pegged at 3.49%, while National Fuel Gas’ dividend yield is 4.36%. Both the companies’ dividend yield is better than the industry’s average yield of 3.29%.

Price Performance

In the past six months, Southwest Gas’ and National Fuel Gas' shares have lost 8.9% and 2.2% respectively,  compared with the industry's decline of 2.3%.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for Southwest Gas and National Fuel Gas is 9.18% and 12.2%, respectively. National Fuel Gas has outperformed the industry’s ROE of 9.37%.

Outcome

Even though both these companies are efficiently providing services to customers and should be retained in one’s portfolio, the above comparisons put National Fuel Gas ahead of Southwest Gas.

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In-Depth Zacks Research for the Tickers Above


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Southwest Gas Corporation (SWX) - free report >>

National Fuel Gas Company (NFG) - free report >>