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Why Is Southwest Gas (SWX) Up 4.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Southwest Gas (SWX). Shares have added about 4.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Southwest Gas Q1 Earnings Miss, Revenues Beat Estimates

Southwest Gas Holding Inc. recorded first-quarter 2022 operating earnings per share (EPS) of $1.74, which missed the Zacks Consensus Estimate of $2.02 by 13.9%. The bottom line also decreased by 14.3% from the year-ago quarter’s tally of $2.03 per share.

Total Revenues

Operating revenues of $1,267.4 million surpassed the Zacks Consensus Estimate of $1,055 million by 20%. The top line improved by 43.1% from $885.9 million in the prior-year quarter.

Highlights of the Release

Total operating expenses in the first quarter amounted to $1,098.9 million, up 54.2% from the year-ago figure of $712.5 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 $168.5 million, down 2.9% year over year.

Financial Highlights

Cash and cash equivalents as of Mar 31, 2022 were $624.7 million compared with $222.7 million as of Dec 31, 2021.

The long-term debt, less current maturities, amounted to $4,559.7 million as of Mar 31, 2022 compared with $4,115.7 million as of Dec 31, 2021.

Southwest Gas’ net cash provided by operating activities for the first three months of 2022 was $186.6 million compared with cash used in operating activities of $52.5 million in the year-ago period.

Guidance

SWX reaffirmed plans to invest the $650-$700 million range in the ongoing year in the Natural Gas Distribution segment. The segment expects a utility rate base CAGR of 5% to 7% for the 2022-2026 period.

Southwest Gas expects the five-year capital expenditure in the range of $2.5-$3.5 billion.

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

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Southwest Gas has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, 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 trending upward for the stock, and the magnitude of this revision looks promising. Notably, Southwest Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Southwest Gas belongs to the Zacks Utility - Gas Distribution industry. Another stock from the same industry, Sempra (SRE), has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Sempra reported revenues of $3.82 billion in the last reported quarter, representing a year-over-year change of +17.2%. EPS of $2.91 for the same period compares with $2.95 a year ago.

For the current quarter, Sempra is expected to post earnings of $1.77 per share, indicating a change of +8.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Sempra has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.


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