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Southwest Gas' (SWX) Linetec Acquisition to Expand Business

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Southwest Gas Corporation’s (SWX - Free Report) wholly-owned subsidiary Centuri Construction Group, Inc. will acquire Linetec Services, LLC, an electrical transmission and distribution infrastructure service provider in the Gulf Coast as well as Mid-Atlantic regions.

The Linetec acquisition is estimated to boost the company’s earnings within the first year of closure. The buyout will further strengthen operations of the Infrastructure Services segment.

Details of the Acquisition

Per the terms of the acquisition, the initial transaction will be valued at nearly $336 million including working capital adjustments and transaction expenses. However, Centuri Construction will acquire 80% ownership interest of Linetec Services with approximately $299 million in cash. The company has an option to buy the remaining 20% during the next five years.

This acquisition is likely to increase the company’s service quality and expand the company’s services for electrical transmission and distribution infrastructure throughout the Gulf Coast and Mid-Atlantic regions.

Focus on Growth

The company is expected to invest nearly $2 billion through 2018-2020 to strengthen its natural gas operations and 50-60% of the fund will be invested through internal cash flow. The remaining amount will be funded through debt and equity. The Natural gas segment has added 33,000 new customers in the past 12 months, which is going to have positive impact on its operations.

Apart from organic growth, the company also makes strategic acquisitions to expand its existing operations. Last year, the company acquired New England Utility Constructors Group, which had a positive impact on Infrastructure Services segment’s performance. The new acquisition will further boost earnings in the segment.  

Price Performance

In the past six months, the company’s shares have gained 13.3% compared with the industry’s rise of 1.6%.


 

 

Zacks Rank & Key Picks

Southwest Gas currently has a Zacks Rank #3 (Hold). A few better-ranked stocks from the same sector are ONE Gas, Inc (OGS - Free Report) , ENN Energy Holdings Ltd. (XNGSY - Free Report) and FirstEnergy Corp. (FE - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ONE Gas’ expected EPS growth for the next 3-5 years is pegged at 5.70%. The Zacks Consensus Estimate for 2018 Earnings inched up 0.6% in the past 60 days.

ENN Energy’s expected EPS growth for the next 3-5 years is pegged at 18.0%. The Zacks Consensus Estimate for 2018 Earnings inched up 0.4% in the past 60 days.

FirstEnergy’ expected EPS growth for the next 3-5 years is pegged at 6.0%. The Zacks Consensus Estimate for 2018 Earnings moved up 1.2% in the past 60 days.

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