Southwest Gas Holdings Inc.’s SWX strategic investments blaze a trail to fortify infrastructure, galvanized by accretive acquisitions to stoke the flames of its performance. A bumper crop of customers flocking to its natural gas segment fans the financial flames higher.
Nevertheless, this Zacks Rank #4 (Sell) enterprise is engulfed in the flames of risks due to its reliance on interstate pipelines for the transportation of natural gas.
Stoking the Flames
The inferno of Southwest Gas’ strategic investments is aimed at extinguishing the growing demand for safe, reliable, and affordable energy solutions. The company charts a fiery course with a projected capital investment of $2.4 billion during 2024-2026.
The conflagration of SWX’s natural gas operations boasts a widespread and burgeoning clientele in three territories – Arizona, Nevada, and California. In 2023 alone, it added close to 40,000 new meter sets, stoking a 1.8% growth rate. Fuelled by improving economic conditions, robust demographics, a burgeoning customer base, and the relentless blaze of a decoupled rate structure in all operating territories, Southwest Gas’ performance is set to blaze a scorching path forward.
The company fans the flames of growth through strategic acquisitions to expand its footprint. Proceeds from the sale of common stock under its Equity Shelf Program are meant to fuel the fiery cause by financing general corporate needs, including the acquisition of property for constructing, completing, extending, or enhancing pipeline systems and facilities in the communities served by Southwest Gas.
Putting Out the Flames
Southwest Gas is ensnared in the fiery grip of depending on access to the transportation capacity of interstate pipelines. Should this lifeline be cut off, the flames of derailing its ability to meet customer needs could turn into a wildfire. Balancing both adequate natural gas supplies and interstate pipeline capacity is paramount to satisfy demand.
The company finds itself in the fiery furnace of not owning significant assets apart from the stock of operating subsidiaries. This fiery dependence on its units to meet financial needs leaves SWX vulnerable. Moreover, the ability to distribute dividends is shackled to the net income and cash flows of its units.
Price Performance Sparks
In the last half a year, the embers of the company have surged by 27.3%, outperforming the industry’s 9.6% growth, setting the stage ablaze.
Image Source: Zacks Investment Research
Kindling to Consider
A few sparks from the same sector shine brighter, including Atmos Energy ATO, MDU Resources Group MDU, and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) currently. For the full ensemble of today’s Zacks #1 Rank (Strong Buy) stocks, you might want to take a peek here.
ATO’s long-term (three to five years) growth rate lights a spark at 7.26%. A gleaming Zacks Consensus sees an 8% annual illumination in ATO’s 2024 EPS.
MDU’s flame of long-term growth flickers at 6.3%. The Zacks Consensus sees a 2% rise in MDU’s 2024 earnings to fuel the glow.
NiSource’s long-term flame of growth burns at 7.15%. The Zacks Consensus sheds light on a 6.9% glow in NI’s 2024 EPS.
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