Southwest Gas Holdings Inc (SWX) Q2 2024 Earnings: EPS of $0.25 Beats Estimates, Revenue Hits $1.18 Billion

Utility Segment Drives Growth Amidst Challenges

Summary
  • Net Income: $18.3 million for Q2 2024, down from $28.9 million in Q2 2023.
  • GAAP EPS: $0.25 per diluted share, compared to $0.40 per diluted share in Q2 2023.
  • Revenue: $1,182.2 million, exceeding the estimated $1,177.82 million.
  • Utility Segment Performance: Net income of $27.6 million, up 44.5% from $19.1 million in Q2 2023.
  • Cash Position: Ended the quarter with nearly $600 million in cash, indicating strong liquidity.
  • Centuri IPO: Successfully executed, with net proceeds of approximately $328 million used to reduce Centuri's debt.
  • Guidance Update: Raised full-year 2024 utility net income guidance by $5 million to a range of $233 to $243 million.
Article's Main Image

On August 6, 2024, Southwest Gas Holdings Inc (SWX, Financial) released its 8-K filing detailing the financial results for the second quarter of 2024. The company reported consolidated net income of $18.3 million, or $0.25 per diluted share, surpassing the analyst estimate of $0.11 per share. Adjusted consolidated net income stood at $22.5 million, or $0.31 per diluted share.

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Company Overview

Southwest Gas Holdings Inc is a utility company engaged in the purchasing, distributing, and transporting of natural gas in the American Southwest. The company operates through two segments: Natural Gas Distribution and Utility Infrastructure Services. The Natural Gas Distribution segment, which serves Arizona and Nevada, accounts for roughly half of the company's revenue. The Utility Infrastructure Services segment, through its subsidiary Centuri Construction Group, provides underground piping contractor services and generates the other half of the company's revenue.

Performance and Challenges

Southwest Gas Holdings Inc reported a significant increase in utility earnings, with the Natural Gas Distribution segment recording net income of $27.6 million, up from $19.1 million in the same quarter last year. This 44.5% growth was driven by an improved operating margin and lower depreciation and amortization expenses. However, the Utility Infrastructure Services segment faced challenges, with net income dropping to $5.1 million from $18.8 million in Q2 2023, primarily due to reduced volumes under existing Master Service Agreements (MSAs) and the completion of major projects.

Financial Achievements

The company successfully executed the initial public offering (IPO) of Centuri Holdings Inc, raising approximately $328 million. The proceeds were used to repay Centuri's debt, significantly improving the company's financial position. Southwest Gas Holdings ended the quarter with nearly $600 million in cash and expects limited capital market needs through 2026.

Key Financial Metrics

Metric Q2 2024 Q2 2023
Consolidated Operating Revenues $1,182.2 million $1,293.6 million
Net Income $18.3 million $28.9 million
Adjusted Net Income $22.5 million $38.8 million
Diluted EPS $0.25 $0.40
Adjusted Diluted EPS $0.31 $0.54

Income Statement Highlights

The Natural Gas Distribution segment saw a $10.8 million increase in operating margin, driven by rate relief in Nevada and California and customer growth. However, the Utility Infrastructure Services segment experienced a $133.7 million decrease in revenues due to reduced volumes under existing MSAs and the completion of significant projects.

Balance Sheet and Cash Flow

Southwest Gas Holdings ended the quarter with $565 million in cash. The company extended its $550 million term loan credit agreement, now maturing on July 31, 2025, with a 17.5 basis point reduction in applicable spread. Corporate and administrative expenses included $11 million in interest expense related to outstanding borrowings and $1.7 million in Centuri separation costs.

Analysis and Outlook

Southwest Gas Holdings Inc has raised its full-year 2024 utility net income guidance by $5 million, now expecting net income in the range of $233 to $243 million. The company continues to optimize utility performance through disciplined business management and regulatory priorities. The successful IPO of Centuri and subsequent debt repayment have strengthened the company's financial position, allowing it to focus on its core utility operations.

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Explore the complete 8-K earnings release (here) from Southwest Gas Holdings Inc for further details.