Southwest Gas SWX makes strategic investments to further strengthen its infrastructure and boost operations. The company is also gaining from consistent customer additions. Given its earnings growth opportunities and better debt management, SWX is a solid investment option in the utility sector.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.

SWX’ Growth Projections & Surprise History

The Zacks Consensus Estimate for 2025 earnings per share (EPS) has moved up 1.1% in the past 60 days to $3.70.

The Zacks Consensus Estimate for fiscal 2025 sales is pinned at $5.25 billion, indicating year-over-year growth of 2.8%.

SWX’ long-term (three to five years) earnings growth rate is 6.61%. The company delivered an average earnings surprise of 0.5% in the past four quarters.

SWX’ Debt Position  

Currently, Southwest Gas’ total debt to capital is 57.88%, much better than the sector’s average of 60.62%. A lower ratio suggests the company is less reliant on borrowed money, reducing the risk of defaulting on debt obligations and a stronger financial position.

SWX’ Dividend Yield

Utility optimization and cost management efforts allow the company to reward its shareholders. Upon completion of the separation of Centuri, Southwest Gas plans to target a dividend payout ratio in line with gas utility peers. Currently, the company’s quarterly dividend is 62 cents per share, resulting in an annualized dividend of $2.48 per share. The company’s current dividend yield is 3.31%, better than the Zacks S&P 500 Composite’s 1.3%.

SWX’ Systematic Investments

Southwest Gas strategically plans its investment to meet the growing demand for safe, reliable and affordable energy solutions. The company expects a capital investment of $4.3 billion in 2025-2029. In 2024, it made capital investments of nearly $946 million, up 8.4% from the 2023 level. The capital expenditure for 2025 is expected to be $880 million to support customer growth, system improvements and pipe replacement programs.

SWX’ Customer Growth

The company’s natural gas operations have a diversified and growing customer base in three states, namely Arizona, Nevada and California. Owing to strong economic growth across its service areas, the company installed 41,000 first-time meter sets in the 12 months ended Dec. 31, 2024.

Southwest Gas anticipates 1.4% growth in customers per year through 2029. The ongoing increase in the customer base will drive demand and performance for the company.

SWX’ Stock Price Performance

In the past three months, shares of the company have risen 5.8% against the industry’s 5.9% decline.

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Other Stocks to Consider

A few other top-ranked stocks from the same industry are UGI Corporation UGI, New Jersey Resources NJR and Chesapeake Utilities CPK, each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UGI’s long-term earnings growth rate is 4.8%. The Zacks Consensus Estimate for UGI’s fiscal 2025 sales implies year-over-year growth of 8.4%.

The Zacks Consensus Estimate for NJR’s fiscal 2025 EPS indicates a year-over-year increase of 7.5%. The Zacks Consensus Estimate for NJR’s fiscal 2025 sales implies year-over-year growth of 2.5%.

The Zacks Consensus Estimate for CPK’s 2025 EPS indicates year-over-year growth of 16.3%. The company delivered an average earnings surprise of 2.4% in the last four quarters.

 

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This article originally published on Zacks Investment Research (zacks.com).

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