Southwest Gas delivers a positive earnings surprise

Kevin Rademacher

Thursday, July 31, 2003 | 11:05 a.m.

Las Vegas-based Southwest Gas Corp. on Wednesday cited typically hot summer weather as the culprit behind a $4.1 million, or 12 cents a share, second-quarter loss.

Still, the loss was better than Wall Street estimates of a 29 cents-a-share loss reported by Thomson First Call.

Wednesday's announcement also was better than the $20.6 million, or 63 cents a share, lost in the second quarter of 2002. That loss was driven up by a $9 million write off settling litigation related to a failed 1999 merger.

Jake Mercer, a utilities analyst with US Bancorp Piper Jaffray, said the narrower losses were unexpected.

"I am surprised to the positive," he said. "I think the results were pretty impressive."

The company said losses are typical for the warm second and third quarters, which limit demand for natural gas. This loss, however, comes on the heals of a disappointing first quarter in which warm spring temperatures limited sales. First-quarter net income was $25.5 million, or 76 cents per share. That missed Wall Street estimates by 35 cents a share.

"The fundamentals of our company remain strong," said Southwest Gas Chief Executive Michael Maffie. "But in order to reach our bottom-line potential, we will need some help from Mother Nature in the form of colder weather."

Revenue for the second quarter was $256 million, down from $261 million in the same 2002 quarter

Customer growth added $3 million to the quarterly revenue, the company said in its earnings statement. Southwest Gas also pointed to a $1.3 million -- or 6 percent -- reduction in interest costs after refinancing $130 million in debt during the first quarter.

While Mercer agreed the company could use a cold spell to boost sales, the cost-cutting measures were a positive step.

"Obviously, they can't control the weather," Mercer said. "But everything they can influence, I want them to work on. I think they have. ... The bottom line is we're starting to see all those steps come through in the results."

The company's stock advanced 5 percent on the earnings news at midday, trading at $21.47, up $1.02.

Southwest Gas provides natural gas service to about 1.5 million customers in Nevada, Arizona and California.