Southwest Gas (SWX) Tops Q4 EPS by 23c; Provides FY20 EPS Outlook

Southwest Gas (NYSE: SWX) reported Q4 EPS of $1.67, $0.23 better than the analyst estimate of $1.44.

Commenting on Southwest Gas Holdings' performance and outlook, John P. Hester, President and Chief Executive Officer, said: "We are pleased to report 2019 diluted earnings per share of $3.94, which surpassed our revised annual expectations. Our natural gas operations benefited from strong local economies, population growth out-pacing the national average, and active new home construction, all contributing to our additional 34,000 net new customers. Income from investments underlying COLI policies posted outsized returns in 2019, reflective of the broader bullish stock market. Centuri, our utility infrastructure services segment, posted another record earnings year, benefiting from the first full year of integration of our Linetec acquisition completed in November 2018.

"On the horizon, we look forward to the conclusion of multiple ongoing utility rate proceedings, which are largely expected to fortify 2021 and future years' earnings. We also look forward to continuing to uphold the promise of natural gas, with 91% of our customers expressing their preference for this choice in meeting their energy needs, and viewing it as affordable, reliable and clean. Centuri will also continue its efforts to set itself apart as a premier utility infrastructure services business, which prides itself on quality and safety in meeting the infrastructure needs of North America's natural gas and electric utilities."

GUIDANCE:

Southwest Gas sees FY2020 EPS of $3.75-$4.00, versus the consensus of $3.95.

Management expects 2020 diluted earnings per share to be between $3.75 and $4.00. Other highlights of 2020 expectations include the following:

Natural Gas Operations Segment

• Operating margin for 2020 is anticipated to benefit from customer growth (1.7%), infrastructure tracker mechanisms, expansion projects, and rate relief (including California attrition and anticipated partial-year Arizona results). Combined, these items are expected to produce an increase in operating margin of 4% to 5%.
• Pension costs expected to increase $13.6 million primarily due to lower discount rate. Approximately $5.2 million to be reflected in other expense.
• Operating income is expected to increase 3% to 5%.
• COLI earnings are estimated at $3 million to $5 million.
• Capital expenditures in 2020 are estimated between $650 million and $700 million, in support of customer growth, system improvements, and pipe replacement programs.

Utility Infrastructure Services Segment

• Centuri\'s revenues for 2020 are expected to be 5% to 10% greater than 2019 due to its stable base of large utility clients and related growth opportunities.
• Operating income is expected to be approximately 5.5% to 6% of revenues.
• Interest expense is expected to be $13.5 million to $14.5 million.
• Net income expectations reflect earnings attributable to Southwest Gas Holdings, net of earnings attributable to noncontrolling interests (estimated at approximately $4 million). Changes in Canadian currency exchange rates could influence results.

For earnings history and earnings-related data on Southwest Gas (SWX) click here.

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