Southwest Gas (US:SWX)2025-11-05 17:02Financial Data and Key Metrics Changes - The trailing 12-month return on equity (ROE) improved to 8.3% [5] - Earnings per share (EPS) from continuing operations improved by $13.4 million, or $0.19 per diluted share, compared to the previous year's third quarter, with consolidated EPS for the quarter at $3.74 per diluted share [26][30] - Full-year net income is now expected toward the top end of the $265 to $275 million range [7][35] Business Line Data and Key Metrics Changes - Utility operating margin increased by $26.8 million, primarily driven by $22.3 million of combined rate relief across all jurisdictions and $1.6 million from customer growth [27] - Operating and maintenance (O&M) expenses increased by $4.1 million, mainly due to variable labor and benefit costs, including a $4 million increase in incentive compensation [27] - Year-to-date O&M expense is up approximately 2.5%, which is less than inflation, reflecting continued cost discipline [27] Market Data and Key Metrics Changes - The company successfully completed the full deconsolidation and separation of Centuri, generating nearly $1.4 billion of net sale proceeds, which were used to repay all debt at the holding company [8][10] - The cash balance increased to nearly $780 million, with over $1.5 billion of liquidity across the business [10][11] Company Strategy and Development Direction - The company is focused on its natural gas-regulated business and is optimistic about future regulatory environments in all jurisdictions [5][6] - Anticipated rate cases in California, Arizona, and Nevada are expected to improve rate-making opportunities and enhance returns for shareholders [7][19] - The company aims to sustain robust organic rate-based growth driven by strong regional demand while enhancing earnings through disciplined financial management and operational excellence [36] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future and the promising opportunities ahead, particularly in light of strong economic activity in service areas and positive regulatory outcomes [11][35] - The company is committed to maintaining an investment-grade profile and has received an S&P upgrade to BBB+ with stable outlooks [10][33] Other Important Information - Rob Stefani, the CFO, will be leaving the company on December 1, and the board has initiated a search for his successor [11][12] - The company plans to continue paying a competitive dividend to shareholders, with planned payouts in 2025 expected to result in a payout ratio competitive with natural gas peers [32] Q&A Session Summary Question: Update on Great Basin project timelines and capital costs - Management discussed the finalization of precedent agreements and the potential for a supplemental open season to clarify capacity needs, with updates expected in the fourth quarter [39][41] Question: Clarification on margin increase components - The margin increase was attributed to rate relief, customer growth, and recovery mechanics on interest recovery [48] Question: Timeline for FERC filing and potential obstacles - Management confirmed that they are still targeting a November 2028 in-service date and do not foresee major obstacles, focusing on finalizing commitments from shippers [50][78] Question: Cash position and construction timeline for Great Basin - Cash will remain in short-term investments until construction starts, with management assessing the project scope and timing [63][66] Question: EPS guidance for the fourth quarter - Management indicated that they expect to provide longer-term EPS guidance in the future, incorporating potential opportunities [67]