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MDU or SWX: Which Is a Better Utility Gas Distribution Stock?
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Key Takeaways
Both MDU and SWX benefit from rising natural gas demand and interest rate cuts.
MDU posts a higher ROE at 9.86% vs. SWX's 6.76%, and maintains a lower debt-to-capital ratio than its peer.
In the past three months, MDU stock has lost 0.5% compared with SWX's 2.3% decline.
Natural gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The natural gas network in the United States has nearly 3 million mainline and other pipelines. The increasing consumption of natural gas in the United States and abroad is driving demand for distribution pipelines.
As a result of rising exports volume and public awareness of reduced emissions, the nation has seen an increase in domestic natural gas output. As the demand for natural gas from different consumer sectors develops, more distribution pipelines will be required.
In order to repair and maintain a vast network of pipes as well as address aged infrastructure, the natural gas sector also needs a consistent flow of funds. The Fed has lowered the federal fund rate by one percentage point since September 2024, and rate cuts are anticipated in 2025 second-half. The rate reduction will reduce capital servicing costs of the utilities and increase their margins and profitability.
In general, utility service companies experience steady increases in revenues and profitability. Regular dividend payments from utilities can increase shareholder value because of their capacity to manage returns and create cash flows.
Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumption for electricity generation is expected to contribute nearly 40% in 2025 as well as 2026. Natural gas exports are the main driver of growth in U.S. natural gas demand in EIA’s forecast. Additional growth in natural gas demand comes rising export volume, which are anticipated to increase 8% in 2025 and 7% in 2026. In total, EIA expects natural gas exports to increase 3.4 billion cubic feet per day (Bcf/d) in 2025 and 2.1 Bcf/d in 2026.
In this article, we run a comparative analysis on two Utility - Gas Distribution companies — MDU Resources Group (MDU - Free Report) and Southwest Gas (SWX - Free Report) — to decide which stock is a better pick for your portfolio now.
MDU Resources has a market capitalization of $3.43 billion, while Southwest Gas has $5.11 billion.
Growth Projection & Surprise History of MDU & SWX
The Zacks Consensus Estimate for MDU Resources’ 2025 earnings per share (EPS) has increased 1.1% to 95 cents in the past 60 days. The company has delivered an average earnings surprise of 1.3% in the past four quarters.
The Zacks Consensus Estimate for Southwest Gas’ 2025 EPS has increased 4.8% to $3.72 in the past 60 days. The company delivered an average earnings surprise of 6% in the past four quarters.
MDU & SWX’s Return on Equity
ROE indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, MDU and SWX’s ROE is 9.86% and 6.76%, respectively, compared with the industry’s 9.24%.
Debt Position of MDU & SWX
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. MDU Resources and Southwest Gas have a debt-to-capital of 44.44% and 57.36%, respectively, compared with the industry’s 50.49%.
MDU & SWX’s Stock Price Performance
In the past three months, MDU’s shares have lost 0.5% against the industry's growth of 5.8%. Shares of SWX have lost 2.3% in the same time frame.
Image Source: Zacks Investment Research
MDU & SWX’s Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for MDU Resources is 3.1%, while the same for Southwest Gas is 3.49%. The dividend yields of both companies are better than the Zacks S&P 500 Composite’s average of 1.24%.
MDU & SWX Trading at a Premium
Both companies are currently trading at a premium compared to the industry on a forward 12-month P/E basis. MDU is trading at a P/E F12M of 17.16X compared to its industry average of 14.84X. SWX is trading at a P/E F12M of 17.98X.
Conclusion
Southwest Gas and MDU Resources are both well-positioned stocks that would be wise additions to any portfolio. They have the capacity to significantly enhance their current standing and meet the needs of their expanding customer base. However, our choice at this moment is MDU, given its better ROW, debt management and price performance than SWX.
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MDU or SWX: Which Is a Better Utility Gas Distribution Stock?
Key Takeaways
Natural gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The natural gas network in the United States has nearly 3 million mainline and other pipelines. The increasing consumption of natural gas in the United States and abroad is driving demand for distribution pipelines.
As a result of rising exports volume and public awareness of reduced emissions, the nation has seen an increase in domestic natural gas output. As the demand for natural gas from different consumer sectors develops, more distribution pipelines will be required.
In order to repair and maintain a vast network of pipes as well as address aged infrastructure, the natural gas sector also needs a consistent flow of funds. The Fed has lowered the federal fund rate by one percentage point since September 2024, and rate cuts are anticipated in 2025 second-half. The rate reduction will reduce capital servicing costs of the utilities and increase their margins and profitability.
In general, utility service companies experience steady increases in revenues and profitability. Regular dividend payments from utilities can increase shareholder value because of their capacity to manage returns and create cash flows.
Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumption for electricity generation is expected to contribute nearly 40% in 2025 as well as 2026. Natural gas exports are the main driver of growth in U.S. natural gas demand in EIA’s forecast. Additional growth in natural gas demand comes rising export volume, which are anticipated to increase 8% in 2025 and 7% in 2026. In total, EIA expects natural gas exports to increase 3.4 billion cubic feet per day (Bcf/d) in 2025 and 2.1 Bcf/d in 2026.
In this article, we run a comparative analysis on two Utility - Gas Distribution companies — MDU Resources Group (MDU - Free Report) and Southwest Gas (SWX - Free Report) — to decide which stock is a better pick for your portfolio now.
Both stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MDU Resources has a market capitalization of $3.43 billion, while Southwest Gas has $5.11 billion.
Growth Projection & Surprise History of MDU & SWX
The Zacks Consensus Estimate for MDU Resources’ 2025 earnings per share (EPS) has increased 1.1% to 95 cents in the past 60 days. The company has delivered an average earnings surprise of 1.3% in the past four quarters.
The Zacks Consensus Estimate for Southwest Gas’ 2025 EPS has increased 4.8% to $3.72 in the past 60 days. The company delivered an average earnings surprise of 6% in the past four quarters.
MDU & SWX’s Return on Equity
ROE indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, MDU and SWX’s ROE is 9.86% and 6.76%, respectively, compared with the industry’s 9.24%.
Debt Position of MDU & SWX
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. MDU Resources and Southwest Gas have a debt-to-capital of 44.44% and 57.36%, respectively, compared with the industry’s 50.49%.
MDU & SWX’s Stock Price Performance
In the past three months, MDU’s shares have lost 0.5% against the industry's growth of 5.8%. Shares of SWX have lost 2.3% in the same time frame.
Image Source: Zacks Investment Research
MDU & SWX’s Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for MDU Resources is 3.1%, while the same for Southwest Gas is 3.49%. The dividend yields of both companies are better than the Zacks S&P 500 Composite’s average of 1.24%.
MDU & SWX Trading at a Premium
Both companies are currently trading at a premium compared to the industry on a forward 12-month P/E basis. MDU is trading at a P/E F12M of 17.16X compared to its industry average of 14.84X. SWX is trading at a P/E F12M of 17.98X.
Conclusion
Southwest Gas and MDU Resources are both well-positioned stocks that would be wise additions to any portfolio. They have the capacity to significantly enhance their current standing and meet the needs of their expanding customer base. However, our choice at this moment is MDU, given its better ROW, debt management and price performance than SWX.