Southwest Gas Holdings Revises Financial Statements
In a regulatory filing, the company stated, "Southwest Gas Holdings is filing this Current Report on Form 8-K to report the Audit Committee of the Board of Directors of the company's conclusion that the company's unaudited Condensed Consolidated Financial Statements as of June 30, 2025 and September 30, 2025, and for the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025 should no longer be relied upon, as discussed further below. In connection with the preparation of the company's upcoming Annual Report on Form 10-K for the year ended December 31, 2025, management identified errors related to the estimated deferred income tax liabilities for state income taxes. The errors do not impact the company's previously communicated guidance metrics. The company reaffirms its guidance for 2025 net income as well as the expected compound annual growth rates for Southwest Gas Corporation net income and rate base for the 2025-2029 period. The company does not expect any impact on previously reported operating margin, cash flows, credit metrics, historical state income tax returns, cash income taxes paid, nor compliance with debt covenants for any previous interim periods or years related to these errors. The company expects that there will be a de minimis effect on annual cash income tax payments in future years. The issues result from not timely updating estimated apportionment rates to reflect certain events. For Southwest Gas Corporation, the errors date back to the formation of Southwest Gas Holdings in 2017, when Southwest Gas Corporation and Centuri Holdings became wholly-owned subsidiaries of Southwest Gas Holdings. These errors were determined to be not material to any previously issued Southwest Gas Corporation financial statements. Although these financial statements can still be relied upon, Southwest Gas Corporation plans to revise the historical financial statements due to the cumulative effect of correcting the deferred income tax error in the 2025 Form 10-K. For the company, the errors arose following the company's sale of shares of Centuri's common stock in the second and third quarters of 2025, which resulted in the tax deconsolidation of Centuri."
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Southwest Gas Holdings Upgraded to Buy by Citi with $99 Price Target
- Earnings Guidance Upgrade: Citi upgraded Southwest Gas Holdings from Neutral to Buy with a $99 price target, anticipating EPS growth guidance of approximately 10.4% through 2030, significantly higher than the previous 7% forecast, driven by the Great Basin gas pipeline expansion and regulatory improvements in Arizona and Nevada.
- Business Restructuring Completed: The company has successfully exited its construction business, a strategic move that not only optimizes resource allocation but also enhances overall profitability, thereby strengthening its competitive position in the market.
- Acquisition Potential Analysis: Citi analyst noted that Southwest Gas remains a potential acquisition target; while a deal is unlikely in the near term, it is trading at 1.25x the 2025 rate base, at the low end of the recent gas utilities M&A range, indicating strong acquisition appeal.
- Market Competition Comparison: Southwest Gas currently trades at a discount to MDU Resources, which has rallied on a similar pipeline expansion opportunity, with Citi analysts viewing Southwest as a more attractive investment choice, reflecting market recognition of its future growth potential.
