Southwest Gas Q2 2025 presentation: 22% profit growth, reaffirms full-year guidance

Introduction & Market Context

Southwest Gas Holdings, Inc. (NYSE:SWX) presented its second quarter 2025 results on August 6, 2025, highlighting a 22% year-over-year increase in net income and reaffirming its full-year guidance. The natural gas utility continues to advance its strategy of becoming a premier, fully regulated natural gas business while making progress on its separation from Centuri.

The company’s stock closed at $79.56 on August 5, 2025, near its 52-week high of $80.29, showing recovery since its Q1 earnings report when the stock had declined 4.48% following a revenue miss despite an EPS beat.

As shown in the following strategic positioning slide, Southwest Gas is focusing on delivering energy solutions to growing service territories, optimizing utility performance, and working with regulators while pursuing a pure-play utility strategy:

Quarterly Performance Highlights

Southwest Gas reported Q2 2025 net income of approximately $34 million, representing a 22.0% improvement compared to Q2 2024. Year-to-date net income reached approximately $177 million, an 8.1% increase versus the same period in 2024.

The company’s strong performance was driven by customer growth, with approximately 40,000 new meter sets added during the last 12 months, leading to a 1.8% customer growth rate. The company also received approval to accelerate the return to Nevada customers of over-collected purchased gas costs.

The following slide summarizes these key performance metrics:

Southwest Gas reported adjusted diluted earnings per share of $0.53 for Q2 2025, compared to $0.31 in Q2 2024. This improvement was primarily driven by higher margin from rate relief and customer growth, combined with higher other income from COLI policies, partially offset by higher O&M, interest expense, and depreciation and amortization.

The following earnings per share walk illustrates the key drivers of this improvement:

For the natural gas distribution segment specifically, GAAP net income increased to $33.7 million in Q2 2025 from $27.6 million in Q2 2024, representing the highest second quarter net income on record. This improvement was driven by $23.7 million in rate relief and $2.5 million from customer growth:

Strategic Initiatives

Southwest Gas continues to make progress on its Centuri separation strategy, having completed two follow-on public offerings of Centuri (NYSE:CTRI) common stock. The May 22, 2025 offering sold 13.2 million shares at $17.50 per share, while the June 18, 2025 offering sold 12.3 million shares at $20.75 per share. These offerings reduced SWX’s ownership in Centuri to approximately 52.1%.

The company used the approximately $470 million in net proceeds to repay debt, with $225 million remaining on the SWX Term Loan and $13 million on the SWX Revolving Credit Facility. The company noted that it no longer expects to issue equity in 2025.

A significant growth opportunity for Southwest Gas is the potential Great Basin expansion project. Great Basin Gas Transmission Company, a FERC-regulated natural gas transmission pipeline company and a wholly-owned subsidiary of Southwest Gas, is planning an expansion project that could add up to 1.76 BCF/day of incremental capacity. The project represents a potential capital expenditure opportunity of approximately $1.2-$1.6 billion, with a service date of November 1, 2028.

The following slide provides details on this expansion opportunity:

Regulatory Updates

Southwest Gas has made significant progress on its regulatory agenda in 2025. The company received approval for its Arizona rate case in Q1 2025, with a revenue increase of approximately $80.2 million and a 9.84% ROE. The Great Basin rate case was also approved in Q1 2025, resulting in a revenue increase of approximately $9.6 million and an 11.95% ROE.

In Nevada, the company received approval for SB 417 Alternative Ratemaking in Q2 2025, which CEO Karen Haller noted could lead to "improved regulatory processes and savings for customers." The company is focused on the formula rate alternative and plans to file for gas planning in September 2025.

Southwest Gas also filed a rate case in California in September 2024, requesting a revenue increase of approximately $44 million, with rates anticipated to become effective in January 2026.

Financial Position & Balance Sheet Improvement

Southwest Gas has significantly improved its balance sheet strength, using proceeds from the Centuri offerings to reduce debt by approximately $470 million. The company’s estimated S&P FFO/Debt ratio stands at 16.1%, showing improvement from previous years.

The following slide illustrates the company’s balance sheet strength and commitment to maintaining an investment grade profile:

The company’s continued efforts to improve its balance sheet are shown in the following chart, which displays the S&P Calculated FFO and S&P Adjusted Debt from 2022-2024 and the last twelve months of 2025:

Forward-Looking Guidance

Southwest Gas reaffirmed its 2025 guidance, projecting net income of $265-$275 million and capital expenditures of approximately $880 million for its utility business. For the 2025-2029 period, the company is targeting 6.0-8.0% compound annual growth rates for both net income and rate base, with planned capital expenditures of $4.3 billion.

The following slide summarizes this guidance:

The company believes it is well-positioned to unlock significant stockholder value through its strategic initiatives, balance sheet management, and organic growth opportunities. Strong economic development in its service territories, particularly in Arizona and Nevada, is expected to support continued customer growth and capital investment.

Southwest Gas remains committed to maintaining a competitive dividend, with plans to target a dividend payout ratio in line with gas utility peers upon completion of the full separation of Centuri. The company has maintained or increased its dividend for many consecutive years, demonstrating its commitment to shareholder returns alongside its growth strategy.

Full presentation:

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