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Southwest Gas (SWX) Up 8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Southwest Gas (SWX - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Southwest Gas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Southwest Gas Q2 Earnings Miss, Revenues Beat Estimates

Southwest Gas Holding Inc. recorded second-quarter 2022 operating earnings per share (EPS) of 23 cents, which missed the Zacks Consensus Estimate of 53 cents by 56.7%. The bottom line also decreased by 46.5% from the year-ago quarter’s tally of 43 cents per share.

Total Revenues

Operating revenues of $1,146.1 million surpassed the Zacks Consensus Estimate of $1,011 million by 13.4%. The top line improved by 39.5% from $821.4 million in the prior-year quarter.

Highlights of the Release

Total operating expenses in the second quarter amounted to $1,100.5 million, up 44.4% from the year-ago figure of $762.2 million, due to an increase in the net cost of gas sold, utility infrastructure services expenses and higher operations and maintenance expenses.

The operating income was $45.7 million, down 22.9% year over year.

Financial Highlights

Cash and cash equivalents as of Jun 30, 2022 were $215.9 million compared with $222.7 million as of Dec 31, 2021.

The long-term debt, less current maturities, amounted to $4,588.5 million as of Jun 30, 2022 compared with $4,115.7 million as of Dec 31, 2021.

Southwest Gas’ net cash provided by operating activities for the first six months of 2022 was $263.6 million compared to cash used in operating activities of $1.4 million in the year-ago period.

Guidance

SWX updated capital expenditure plans in the range of $600-$650 million compared with the previously announced $650-$700 million range in the Natural Gas Distribution segment. The segment expects a utility rate base CAGR of 5% to 7% for the 2022-2026 period.

Natural Gas Distribution segment reiterated the five-year capital expenditure expectation in the range of $2.5-$3.5 billion.

The Utility Infrastructure Services segment reiterated its 2022 revenue expectation in the range of $2.65 billion-$2.8 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -22.22% due to these changes.

VGM Scores

Currently, Southwest Gas has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Southwest Gas has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Southwest Gas is part of the Zacks Utility - Gas Distribution industry. Over the past month, Atmos Energy (ATO - Free Report) , a stock from the same industry, has gained 2.8%. The company reported its results for the quarter ended June 2022 more than a month ago.

Atmos reported revenues of $816.43 million in the last reported quarter, representing a year-over-year change of +34.8%. EPS of $0.92 for the same period compares with $0.78 a year ago.

Atmos is expected to post earnings of $0.48 per share for the current quarter, representing a year-over-year change of +29.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.7%.

Atmos has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.


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