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Southwest Gas Holdings, Inc. (SWX)·Q3 2025 Earnings Summary

Executive Summary

  • SWX reported Q3 2025 income from continuing operations of $4.2M and diluted EPS of $0.06, with consolidated diluted EPS of $3.74 driven by a discontinued-operations gain from the full Centuri separation; consolidated operating revenue was $316.9M, down year-over-year due to seasonal gas cost pass-through dynamics .
  • Management reaffirmed 2025 guidance and now expects utility net income toward the top end of $265–$275M, citing regulatory progress, customer growth, and cost discipline; utility trailing 12-month ROE improved to 8.3% .
  • Balance sheet strengthened: ~$879M final Centuri sell-down proceeds used to retire the remaining Term Loan and revolver; S&P upgraded SWX Holdings and SWG credit ratings to BBB+ (stable) .
  • Near-term catalysts: expected California rate case decision effective January 2026; Arizona and Nevada rate cases with potential formula/alternative rate-making paths beginning around 2028; Great Basin expansion precedent agreements advancing with updated shipper rate at $18/dekatherm/month .

What Went Well and What Went Wrong

  • What Went Well

    • Separation complete and debt repaid: “we successfully completed our disposition of Centuri... fully pay down the remaining debt at the holding company,” enabling focus on the regulated utility and enhancing balance sheet strength .
    • Regulatory momentum: utility operating margin rose by $26.8M YoY, primarily from rate relief and customer growth; trailing 12-month utility ROE reached 8.3% .
    • Guidance confidence: “we are reaffirming each of our previously communicated guidance ranges, with full-year net income now expected toward the top end of the $265 to $275 million range” .

  • What Went Wrong

    • Headwinds to other income and interest: lower interest income on regulatory balances and interest incurred on over-collected PGA liabilities reduced other income by $3.4M and increased net interest deductions by $3.8M in Q3 .
    • Higher depreciation and taxes: D&A up $4.9M YoY on 6% average plant growth; income tax expense up $4.6M, reflecting higher pre-tax income and EADIT/COLI impacts .
    • CFO transition introduces leadership uncertainty: SVP/CFO Robert Stefani to depart Dec 1, 2025; board initiated search for successor .

Financial Results

  • Consolidated Revenues and EPS vs prior periods
MetricQ3 2024Q2 2025Q3 2025
Consolidated Operating Revenues ($USD Millions)$359.1 $1,120.4 $316.9
Net EPS - Diluted ($)— (loss; antidilutive) $(0.18) $3.74
Diluted EPS - Continuing Operations ($)$(0.13) N/A$0.06
  • Utility margins (non-GAAP) and trend
MetricQ3 2024Q2 2025Q3 2025
Utility Gross Margin ($USD Millions)$91.7 $140.5 $118.1
Utility Operating Margin ($USD Millions)$247.4 $294.2 $274.2
  • Segment contribution to net income (continuing ops)
SegmentQ3 2024Q3 2025
Natural Gas Distribution ($USD Thousands)$572 $5,520
Corporate & Administrative ($USD Thousands)$(9,799) $(1,345)
Continuing Ops, Net of Taxes ($USD Thousands)$(9,227) $4,175
  • KPIs
KPIQ3 2024 / PriorQ3 2025
Trailing 12-month Utility ROE (%)8.3% (as of Q2’25) 8.3%
New meter sets (LTM)~40,000 ~40,000 (1.8% customer growth)
Cash on hand ($USD Millions)$356 (6/30/25) $779 (9/30/25)
Available liquidity ($USD Billions)>$1.0 (6/30/25) ~$1.5
Authorized Rate Base (Total, $USD Millions)$5,809.8 $5,809.8

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Utility Net Income ($USD Millions)FY 2025$265–$275 $265–$275; now toward top end Maintained; increased confidence
Capital Expenditures ($USD Millions)FY 2025~$880 ~$880 Maintained
Net Income CAGR (%)2025–20296–8% 6–8% Maintained
Rate Base CAGR (%)2025–20296–8% 6–8% Maintained
Total Capex ($USD Millions)2025–2029$4,300 $4,300 Maintained
DividendOngoingCompetitive payout ratio; policy reviewed annually Q1 2026 dividend declared $0.62/sh (annualized $2.48) Announced payment schedule

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Great Basin ExpansionBinding open season; demand ~1.76 Bcf/d; CapEx ~$1.2–$1.6B; rate $14–$17/dekatherm/mo; target in-service Nov 2028 Finalizing precedent agreements; may hold brief supplemental open season; updated shipper rate ~$18/dekatherm/mo; target FERC CPCN filing Q4’26; in-service Nov 2028 Advancing; scope/rate updated
Alternative/Formula Rate-MakingNV SB417 passed; ACC supportive of trackers/SIM; AZ rate case approved with SIM settlement pending NV rulemaking underway; potential first adjustments ~2028; AZ FRP filing targeted Q1’26; decision H1’27; first true-up ~2028 Regulatory path clarifying
California Rate CaseFiled; PAO proposal ~$26–27M; mechanisms continuation; rates expected Jan 2026 Agreement in principle resolving most issues; memo account granted to protect revenue during any delay; effective Jan 2026 Resolution progressing
O&M DisciplineQ1 O&M down $1.5M YoY; target flat per-customer O&M Q3 O&M up $4.1M on variable labor/incentives, partially offset by lower bad debt/leak survey; YTD O&M up ~2.5% (<inflation) Disciplined but variable
PGA Balances/InterestDeferred PGA moved to liability; interest expense up; NV approved accelerated refunds Over-collected PGA liabilities increased YoY; interest expense rose; NV balance beginning to decline after accelerated refund approval Managing regulatory cashflows
Capital & Balance SheetPlan to extend term loan/ATM if needed (Q1); debt reduction via Centuri sell-downs (Q2) All holding company debt repaid; BBB+ upgrades; ~$780M cash and ~$1.5B liquidity Strengthened

Management Commentary

  • “We successfully completed our disposition of Centuri through two final sales transactions... fully pay down the remaining debt at the holding company... With our focus now fully on our natural gas-regulated business, we are better positioned to address the increasing energy needs of our growing service territories.” — Karen Haller, CEO .
  • “We are reaffirming each of our previously communicated guidance ranges, with full-year net income now expected toward the top end of the $265 to $275 million range.” — Management prepared remarks .
  • Regulatory update: “We reached an agreement of principle to resolve all issues in our pending [California] rate case with the exception of cost of capital and capital structure... the settlement provides continuation of annual attrition and tracker mechanisms; memo account authority protects us from delays.” — Justin Brown, President of SWG .
  • Balance sheet outlook: “S&P upgraded SWX Holdings’ issuer and SWG senior unsecured long-term ratings to BBB+... we expect this upgrade should lower borrowing costs and enhance access to capital.” — Rob Stefani, CFO .
  • CFO transition: “Senior Vice President/Chief Financial Officer, Robert J. Stefani will be leaving the Company... the board has initiated an internal and external search.” — Company press release .

Q&A Highlights

  • Great Basin timeline and economics: Management expects to finalize precedent agreements within about a week; may run a short supplemental open season to optimize capacity; updated shipper rate is ~$18/dekatherm/month reflective of 1.76 Bcf/d interest; target CPCN filing Q4’26 and in-service Nov 2028; AFUDC expected during construction .
  • NV and AZ alternative rate-making path: NV SB417 rulemaking underway; rate case targeted March 2026 with alternative rate-making possibly starting as early as 2028; AZ FRP included in next rate case (file Q1’26; new rates H1’27; first true-up ~2028) .
  • Cash deployment: Excess cash currently invested in short-term instruments; potential long-lead deposits for Great Basin as project scope firms; otherwise cash remains in short-term until construction ramps .
  • CFO succession: Interim arrangements to perform CFO functions if successor not named; strong bench within finance and controllers .

Estimates Context

  • Q3 2025 consensus vs reported (S&P Global): EPS was in line; revenue and EBITDA appear lower than consensus, reflecting basis differences (discontinued operations and regulatory gas costs pass-through).
MetricQ2 2025Q3 2025Q4 2025
Primary EPS Consensus Mean ($)0.395 (actual 0.53)*0.062 (actual 0.06)*N/A*
Revenue Consensus Mean ($USD)1,153.1M*864.9M (actual 316.9M)*836.1M*
EBITDA Consensus Mean ($USD)205.4M*158.2M (actual 52.0M)*290.4M*
Primary EPS - # of Estimates1*3*N/A*
Revenue - # of Estimates2*3*3*
Target Price Consensus Mean ($)86.5*86.5*86.5*
Target Price - # of Estimates6*6*6*

Values retrieved from S&P Global.*

Implications:

  • EPS tracked consensus narrowly; reported Q3 diluted EPS from continuing operations was $0.06 .
  • Revenue and EBITDA variances vs consensus likely reflect utility accounting (gas-cost pass-throughs) and the quarter’s discontinued operations effects; investors should anchor on utility operating margin and continuing-ops EPS for comparability .

Key Takeaways for Investors

  • SWX is now a pure-play regulated gas utility with a stronger balance sheet, BBB+ ratings, and ample liquidity; debt overhang from the holding company has been eliminated, reducing financing risk .
  • Utility margin growth is driven by constructive rate outcomes and steady customer additions; O&M discipline remains a priority with YTD growth below inflation, supporting margin durability .
  • Near-term regulatory catalysts: California rate case effective Jan 2026 with revenue protection via memo account; Arizona FRP and Nevada alternative rate-making could begin to reduce lag and smooth earnings starting ~2028 .
  • Great Basin expansion is a material optionality lever; timelines and shipper commitments are coalescing, with AFUDC to support earnings during construction and an updated tariff assumption of ~$18/dekatherm/month .
  • Q3 results were clean at the utility level; consolidated EPS reflects the Centuri deconsolidation gains—focus on continuing-ops EPS ($0.06) and operating margin ($274.2M) for core performance .
  • Dividend continuity reinforced with Q1 2026 $0.62/sh declaration; board expects to review policy in February consistent with historical cadence .
  • Watch for CFO succession and 2026 guidance update on the year-end call; management indicated willingness to provide longer-term EPS guidance post-separation .

Appendix: Additional Data Points

  • Earnings reconciliation: increase in continuing-ops income YoY driven by operating margin (+$26.8M), partially offset by higher O&M (+$4.1M), D&A (+$4.9M), other income (-$3.4M), net interest (-$3.8M), and taxes (+$4.6M) .
  • Authorized rate base and returns across jurisdictions summarized; total authorized rate base ~$5.81B; weighted average authorized ROE ~9.89% .
  • Dividend declared for Q1 2026: $0.62 per share; payable Mar 2, 2026, record Feb 17, 2026 .