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Southwest Gas Holdings, Inc. (SWX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 consolidated net income was $92.5M ($1.28 diluted EPS) and adjusted net income was $100.1M ($1.39 adjusted EPS); utility net income was $97.2M, up vs $91.7M in Q4 2023, as margin gains from rate relief and customer growth offset higher interest expense .
  • Full-year 2024 utility net income reached $261.2M, roughly 8% YoY growth and $18M above the high end of prior guidance, delivering an 8.1% gas-segment ROE; operating margin hit a record $1.3B .
  • 2025 guidance introduced: utility net income $265–$275M, ~6–8% net income CAGR and ~6–8% rate-base CAGR over 2025–2029; 2025 utility CapEx ~$880M. Management expects CFFO to more than fund 2025 CapEx and plans to keep the dividend unchanged in 2025 .
  • Catalysts: Arizona rate case vote on March 27 with $96M revenue increase and 9.5% ROE in the recommended order (separate SIM hearing in May); continued progress toward separation of Centuri with multiple transaction paths preserved (sell-down/share exchange/spin) and a $1.5B NOL to offset taxable transactions .

What Went Well and What Went Wrong

What Went Well

  • Record annual utility operating margin ($1.325B) and sustained >8% ROE, reflecting constructive Nevada case ($~59M annual revenue increase) and strong customer growth (~41k meter sets LTM) .
  • Q4 utility operating margin +$30M YoY on new rates (NV, CA) and customer growth, with per-customer O&M effectively flat YoY due to disciplined cost management .
  • 2025 outlook strengthened: CFFO expected to more than fund CapEx; rate-base CAGR 6–8% and utility net income CAGR 6–8% supported by continued regional economic activity (data centers, advanced manufacturing) .

What Went Wrong

  • Consolidated Q4 other income declined (lower regulatory carrying charges and COLI), and interest expense increased (PGA over-collection interest and timing effects), pressuring consolidated results .
  • Centuri contributed a FY 2024 net loss as offshore wind revenues fell and MSA gas volumes were lower; although Q4 saw storm-restoration strength, the segment remains an earnings drag at the holdco level .
  • Estimate comparisons were unavailable via S&P Global at the time of this analysis, limiting our ability to quantify beats/misses vs Street consensus (see Estimates Context) [GetEstimates error].

Financial Results

Consolidated and Utility Metrics (quarterly)

MetricQ4 2023Q3 2024Q4 2024
Consolidated Operating Revenues ($USD)$1,367,531 $1,079,184 $1,270,137
Diluted EPS (GAAP) ($USD)$1.01 ≈$0.00 (less than $0.01) $1.28
Adjusted Diluted EPS ($USD)$1.20 $0.09 $1.39
Utility Operating Margin ($USD Thousands)$357,593 $247,419 $387,242
Utility Net Income ($USD Thousands)$91,661 $572 $97,185

Segment Contribution to Consolidated Net Income (quarterly)

Segment Contribution ($USD Thousands)Q4 2023Q3 2024Q4 2024
Natural Gas Distribution$91,661 $572 $97,185
Utility Infrastructure Services (Centuri)$(5,250) $9,956 $8,134
Corporate & Administrative$(13,542) $(10,239) $(12,863)
Consolidated Net Income$72,869 $289 $92,456

KPIs and Operating Indicators

KPIQ2 2024Q3 2024Q4 2024
New Meter Sets (LTM) (#)~40,000 ~41,000 ~41,000
Gas Segment ROE (%)7.9% 8.0% 8.1%
Consolidated Cash on Hand ($USD)Nearly $600M >$450M >$360M
Utility Operating Income ($USD Thousands)$55,072 $21,247 $151,668

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Utility Net Income2025—$265–$275M Introduced
Utility Net Income2024$233–$243M Actual: $261.2M (above high end by $18M) Beat/Exceeded
Utility CapEx2025—~$880M Introduced
Utility CapEx2024~$830M Actual: ~$859M (accrual basis) Raised/Actual above plan
Utility Net Income CAGR2025–20299.25%–11.25% (2024–2026) 6%–8% Rebased (new horizon)
Rate Base CAGR2025–20296.5%–7.5% (2024–2026) 6%–8% Rebased/Widened
Dividend2025Plan to keep same dividend Q2 2025 dividend $0.62/share Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Arizona Rate Case & SIM/Formula RateProposed SIM capital tracker; ACC exploring formula rate policy Recommended order incl. $96M revenue increase and 9.5% ROE; SIM hearing set for May; management expects linearity if formula rate adopted Constructive, timing clarity improving
Centuri Separation PathEvaluate sell-down/share exchange; lockup/market timing New CEO onboarded; multiple paths (taxable sell-down/share exchange/spin) preserved; $1.5B NOL as offset Execution readiness; timing market-dependent
Financing Plan & Equity Needs~$75M 2024 ATM; term loan spread reduced No 2024 equity; < $100M 2025 via ATM; potential term loan extension Improved liquidity; minimal issuance expected
O&M DisciplineO&M up <2% YTD; per-customer flat target Per-customer O&M nearly flat; cost controls continue Sustained efficiency
Demand/Regional Growth (Data Centers, Advanced Mfg.)Highlighted inquiries and TSMC halo effects ACC opened gas resource adequacy docket; >90% of new builds adopt gas; strong meter adds Strengthening demand signals
Long-term CapEx & Rate Base Growth2024–2026 net income CAGR 9.25%–11.25%, rate-base CAGR 6.5%–7.5% 2025–2029 net income and rate-base CAGR 6%–8%; 5-year CapEx ~$4.3B Rebased horizon; steady growth outlook

Management Commentary

  • “We currently expect 2025 utility net income to be in the range of $265 million to $275 million… We have strong momentum heading into 2025” — Karen Haller .
  • “We finished the year with record annual operating margin performance and the second straight year of a return on equity over 8%” — Karen Haller .
  • “We now expect to invest about $4.3 billion over the next 5 years… rate base CAGR of 6% to 8% from 2025 to 2029” — Justin Brown .
  • “Cash flow from operations [is] expected to more than fund the entire capital expenditure program forecasted in 2025… less than $100 million of equity needs in 2025, covered through the ATM” — Rob Stefani .
  • “We remain committed to separating Centuri… options include sell-downs or share exchanges… we have preserved the alternative of a tax-free spin” — Karen Haller .

Q&A Highlights

  • Formula rate could make earnings growth more linear over time; current structure yields nonlinearity — CEO .
  • Centuri separation timing remains market-dependent; new CEO viewed as a positive step; multiple market conditions considered beyond price — CEO .
  • Gas adequacy docket in AZ reflects regional load growth; potential upside to utility activity from broader economic development (generation sited near interstate facilities) — Utility President .
  • 6–8% utility net income CAGR excludes SIM/formula rate impacts; favorable mechanisms would raise earned ROE and implied growth rate — CFO .

Estimates Context

  • We attempted to retrieve Street consensus (EPS and revenue) for Q4 2024 and prior quarters via S&P Global’s API, but the request failed due to rate limits. As a result, estimate comparisons are unavailable in this recap and cannot be used to determine beats/misses at this time. We will update with consensus once accessible (Values intended from S&P Global).

Key Takeaways for Investors

  • Utility fundamentals improved: Q4 margin and utility net income rose YoY; per-customer O&M discipline sustained; FY utility net income exceeded guidance high end by $18M — supports confidence in 2025 targets .
  • Regulatory catalysts: Arizona recommended order ($96M revenue increase, 9.5% ROE) with a SIM tracker hearing in May; outcomes can lift earned ROE and smooth earnings trajectory — monitor March 27 commission vote .
  • Financing risk moderated: consolidated cash >$360M, CFFO expected to fund 2025 CapEx; any equity needs (<$100M) likely via ATM; potential term loan extension — limits dilution risk near term .
  • Growth drivers intact: 5-year CapEx ~$4.3B and rate-base CAGR 6–8% anchored by robust regional demand (data centers, advanced manufacturing) and >90% gas adoption in new construction .
  • Centuri separation remains a strategic catalyst; multiple paths preserved with $1.5B NOL to offset taxes in taxable scenarios — timing contingent on market conditions .
  • Dividend stability: board declared Q2 2025 dividend of $0.62/share; management plans to keep the 2025 dividend unchanged as separation progresses .
  • Near-term trading: watch AZ rate-case vote and any separation updates; stock likely sensitive to regulatory outcomes, capital markets actions (ATM usage/term loan extension), and clarity on separation path .

Notes on non-GAAP adjustments: Q4 adjusted EPS ($1.39) and adjusted net income ($100.1M) add back strategic review/separation costs and Centuri intangible amortization; utility operating margin is a non-GAAP measure (revenues less net cost of gas sold) used to analyze performance in a rate-regulated environment .