Southwest Gas Q3 Adjusted EPS Rises, 2026 Guidance Reaffirmed

Southwest Gas Holdings reported a sharp increase in third-quarter earnings from continuing operations and reaffirmed its 2026 and long-term adjusted earnings guidance, as regulatory rate relief, customer growth and lower interest costs supported results.

For the three months ended September 30, 2026, adjusted net income from continuing operations rose to $14.7 million, or $0.20 per diluted share, from $4.2 million, or $0.06 per share, a year earlier. The non-GAAP results exclude non-recurring executive compensation in 2026 and a state income-tax apportionment item in 2025.

GAAP income from continuing operations was $12.8 million, or $0.18 per diluted share, compared with a loss of $3.7 million, or $0.05 per share, in the prior-year period. For the first nine months of 2026, adjusted earnings from continuing operations were $195.4 million, or $2.69 per diluted share, up from $165.0 million, or $2.28 per share.

Utility margin edges higher

The Natural Gas Distribution segment generated third-quarter adjusted net income of $15.2 million, up from $5.5 million a year earlier. Segment operating margin, a non-GAAP measure, increased to $278.1 million from $274.2 million.

The margin benefited from $3.2 million of incremental revenue under updated California rates, $1.6 million from customer growth and $1.5 million related to Arizona’s System Integrity Mechanism. Those gains were partly offset by a $3.9 million decline in non-decoupled margin across Arizona and Nevada, as well as lower recovery and returns on regulatory balances and Nevada’s Variable Interest Expense Recovery mechanism. Net customer growth was about 1% over the latest 12 months.

Operations and maintenance expense was relatively flat year over year, at $135.8 million compared with $133.8 million. Depreciation and amortization increased as gas plant in service grew 7%, while net interest deductions declined by $4.9 million, reflecting lower purchased-gas adjustment balances and greater capitalization of borrowing costs through debt-related allowance for funds used during construction. A deferred state income-tax benefit also supported quarterly results.

At the holding-company level, adjusted losses narrowed to $0.5 million from $1.3 million. Interest expense fell by $2.8 million following repayment of debt that had been outstanding during the comparable 2025 period, partly offset by lower interest income on reduced cash balances.

Regulatory decisions support revenue

Southwest Gas concluded its Nevada general rate case shortly after quarter-end. The final order authorized nearly $48 million in annual revenue increases, below the company’s roughly $74 million request, with rates effective in October 2026. The decision approved a 9.5% return on equity and a 51.35% equity ratio. The company expects Nevada’s rulemaking on alternative ratemaking to be completed by the end of 2026 and anticipates filing for alternative rates by early in the second quarter of 2027.

In California, the company received approval for all components of its general rate case, including $32.6 million in annual revenue increases, a 10% return on equity and a $714 million rate base. The rates took effect January 1, 2026.

The pending Arizona rate case seeks an approximately $91.3 million annual revenue increase and a formula-rate mechanism. Southwest Gas expects rates to become effective April 1, 2027, following a hearing scheduled for December 2026. Regulatory staff and consumer representatives have proposed lower revenue increases and returns on equity than the company requested, creating uncertainty around the final outcome.

Great Basin expansion advances

Southwest Gas said preparations remain on track for Great Basin Gas Transmission to file a Federal Energy Regulatory Commission certificate application by year-end for its planned 2028 expansion.

The project has binding precedent agreements covering 1.0 billion cubic feet per day of demand, with additional expressions of interest totaling 1.8 billion cubic feet per day for projects with proposed 2029-to-2035 in-service dates. The additional interest is not contracted demand.

The brownfield expansion is currently estimated to require about $2.3 billion of capital and is targeted to enter service in the fourth quarter of 2028. Based on the contracted 1.0 Bcf per day, the company estimates annual incremental margin of $270 million to $300 million after the project enters service. Its current design can accommodate close to 2.0 Bcf per day of total contracted demand.

Southwest Gas expects the project to be financed with a targeted 50-50 debt-to-equity mix. Debt would be funded through utility bond issuances, while equity needs are expected to be met through a combination of modest issuances under Southwest Gas Holdings’ at-the-market program and holding-company leverage.

Guidance and capital plans reaffirmed

The company reaffirmed its 2026 adjusted earnings guidance of $4.17 to $4.32 per share from continuing operations. It also maintained its target for a 12% to 14% compound annual increase in adjusted earnings per share from 2025 through 2030 and projected a 9.5% to 11.5% rate-base compound annual growth rate over the same period.

Southwest Gas plans approximately $1.25 billion of capital spending in 2026, comprising about $925 million for the utility and $325 million for the Great Basin expansion. Utility capital expenditures totaled $806 million through the first nine months of the year. The company’s broader 2026-to-2030 capital plan totals $6.3 billion, with 73% expected to be invested at Southwest Gas and 27% at Great Basin.

The company ended the quarter with nearly $700 million of available liquidity. Its 2026 financing plan assumes no equity issuance apart from shares issued through its dividend reinvestment plan, although Southwest Gas may issue up to approximately $325 million of net debt and use as much as $150 million of commercial paper or revolving-credit capacity as needed.

Management’s long-term targets assume alternative ratemaking in Arizona and Nevada and completion of the Great Basin expansion. However, the guidance is based on $1.7 billion of incremental Great Basin capital spending during the five-year forecast period and does not incorporate the project’s updated $2.3 billion total capital estimate.

Actual results remain subject to the timing and amount of regulatory rate relief, customer growth, inflation, interest rates, labor availability and potential credit-rating changes. The Great Basin project also depends on regulatory approvals, construction costs and execution against its planned schedule. Southwest Gas Holdings and its utility subsidiary are targeting an investment-grade profile, including an S&P funds-from-operations-to-debt ratio above 17% over time.