Southwest Gas (NYSE:SWX) reported second-quarter 2026 adjusted earnings per share from continuing operations of $0.45, up from $0.37 in the prior-year period, as lower parent-level interest expense and regulatory progress supported results. Reported earnings per share from continuing operations were $0.58, including revenue recognized following a California rate-case decision.
President and CEO Justin Brown said the adjusted result excluded the retroactive portion of California revenue that had been deferred in a memorandum account since the first quarter because of the timing of the rate-case approval. He said the company is reaffirming its 2026 and long-term guidance ranges.
Interest Savings and Utility Results
Jay Ford, senior vice president of financial planning, said the year-over-year earnings improvement was driven primarily by the holding company’s performance, partially offset by slightly lower utility earnings. The holding company benefited from the repayment of all outstanding parent-level debt, reducing interest expense by approximately $8.6 million from the second quarter of 2025. Higher interest income on elevated cash balances also contributed.
Operating margin increased $12.7 million from a year earlier, including $6.7 million of incremental margin from rate relief and $1.4 million from customer growth, Ford said. Debt recovery-related items added $4.9 million to operating margin, though that benefit was offset by comparable depreciation and amortization expense.
Operations and maintenance expense declined $3.7 million, or nearly 3%, reflecting lower outside services, bad debt expense, and lease and rental costs. Depreciation and amortization increased $8.7 million, driven principally by a 7% rise in gas plant and service versus the prior-year quarter.
Other income declined $9.4 million, with Ford citing lower utility interest income, reduced non-service pension gains, weaker corporate-owned life insurance investment performance, the absence of a prior-year gain on sale, and higher charitable contributions. The company ended the quarter with approximately $270 million in cash and nearly $1 billion in available liquidity, Brown said.
Rate Cases Advance in Three States
Southwest Gas said its 12-month ended return on equity at the utility was 8.1%, or 8% on an adjusted basis, compared with a weighted-average authorized return of 9.89%. Management said pending rate cases and recovery mechanisms are intended to improve earned returns over time.
In California, a recent commission decision resolved all matters except cost of capital and is expected to provide approximately $40 million of incremental annual revenue. The decision allowed the company to recognize about $9.7 million of incremental second-quarter net income tied to previously deferred memorandum-account margin. A final decision on the cost-of-capital component is expected later in August, according to Brown.
In Nevada, the company updated its general rate-case request to approximately $74 million in annual revenue after filing certification materials incorporating post-test-year plant adjustments through May. Intervening parties have recommended an average revenue increase just under $40 million, or about 52% of the company’s request, and their testimony has converged around a 9.3% return on equity with equity ratios ranging from 50% to 51.35%.
The Nevada hearing was scheduled for later in August, while the company also continued settlement discussions. Management said the case remains on track for an October 2026 effective date.
Arizona’s general rate case is proceeding toward an expected April 2027 effective date, with intervener testimony anticipated in late September. Brown said the company would seek areas of agreement with parties as positions become more defined.
Great Basin Expansion Scope Increases
Great Basin made additional progress on its planned 2028 expansion project, executing binding precedent agreements that brought contracted demand to approximately 1 billion cubic feet per day. The company also cited expressions of interest for another 1.8 Bcf of capacity across the region during the 2029-2035 period.
In response to demand, Southwest Gas revised the project design to use a 48-inch pipeline rather than a 42-inch pipeline. The larger design is intended to support up to 1 Bcf per day of incremental transportation capacity beyond currently contracted volumes through future compression additions.
The revised project is now estimated to require about $2.3 billion in capital investment and to generate approximately $270 million to $300 million in annual incremental margin once completed. Brown said the company expects to file for a Federal Energy Regulatory Commission certificate of public convenience and necessity before year-end, target approval in late 2027, and pursue a fourth-quarter 2028 in-service date.
Management said it does not expect the increase in contracted demand to alter the regulatory schedule. Brown added that the company does not anticipate supply-chain issues from changing the pipe design, citing earlier coordination with suppliers on the ability to move to a 48-inch specification.
Financing Plan and Outlook
The company expects to issue $400 million of utility-level debt during the remainder of 2026 and said it does not anticipate equity issuance this year outside its dividend reinvestment plan. Ford said Southwest Gas will renew and extend its at-the-market equity program when it updates its shelf registration, characterizing that action as a routine renewal rather than an indication of near-term issuance.
Management expects only modest equity needs for the expanded Great Basin project and said holding-company leverage capacity could absorb much of the utility’s anticipated equity requirements. At quarter-end, consolidated net debt was approximately $3.4 billion after considering purchased-gas-adjustment balances payable to customers.
Southwest Gas reiterated plans to invest approximately $1.25 billion in capital expenditures during 2026. Its existing five-year plan, based on year-end 2025 rate base of $6.7 billion, supports projected rate-base growth of 9.5% to 11.5% annually through 2030. The additional approximately $600 million of expected capital spending for the Great Basin expansion has not yet been incorporated into current long-term guidance and is expected to be addressed in the company’s five-year planning update next February.
About Southwest Gas (NYSE:SWX)
Southwest Gas Corporation (NYSE: SWX) is a publicly traded natural gas utility that provides regulated gas distribution services to residential, commercial, industrial and electric generation customers. The company’s core activities include the transportation, distribution and sale of natural gas through an extensive network of pipelines, service lines and metering facilities. Southwest Gas also offers related services such as system maintenance, pipeline safety inspections, emergency response and line extensions to support customer growth and ensure reliable gas delivery.
Founded in 1931 in southern Nevada, Southwest Gas has grown through strategic acquisitions and organic expansion to become one of the nation’s larger natural gas utilities by customer count.
