Southwest Gas (NYSE: SWX) reported Q2 EPS of $0.19, $0.01 better than the analyst estimate of $0.18. Revenue for the quarter came in at $547.7 million versus the consensus estimate of $561.21 million.

Outlook for 2016 – 2nd Quarter 2016 Update

Natural Gas Segment:

• Operating margin for 2016 is anticipated to benefit from customer growth (similar to 2015), infrastructure tracker mechanisms, expansion projects, and California attrition. Combined, these items are expected to produce approximately 3% in incremental margin. Additionally, new rates established to recover Nevada CEE program costs are expected to increase margin by approximately $11 million, but will be offset by a similar increase in amortization expense.
• Operations and maintenance expense is expected to increase modestly as compared to 2015 due to increased general costs, pipeline integrity management and damage prevention programs, and costs associated with customer growth. These increases will be mitigated by a decrease in pension costs. Depreciation and general taxes should increase consistent with the growth in gas plant in service (approximately 5% to 6%) plus the amortization of Nevada CEE program costs noted above.
• Operating income is expected to increase by 3% to 4% between years.
• Net interest deductions for 2016 are expected to be approximately $2 million to $4 million higher than 2015, primarily due to an anticipated increase in average outstanding debt associated with the financing of capital expenditures.
• Changes in cash surrender values of COLI policies will continue to be subject to volatility. Management generally anticipates longer term normal increases in COLI cash surrender values to range from $3 million to $5 million on an annual basis.
• Capital expenditures in 2016 are estimated at $460 million, in support of customer growth, system improvements, and accelerated pipe replacement programs.

Construction Services Segment:

• Centuri has a strong base of large utility clients (many with multi-year pipe replacement programs) that can sustain and grow its business. Revenues for 2016 are anticipated to be 7% to 10% greater than 2015 levels.
• Operating income is expected to be approximately 5% to 5.5% of revenues.
• Based on the current interest rate environment, net interest deductions for 2016 are expected to be between $6.5 million and $7.5 million.
• These collective expectations are before considerati

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