The companies in the Zacks Utility - Gas Distribution industry are engaged in the transportation and distribution of natural gas from the region of production to millions of consumers across the United States. Their extensive pipeline and distribution networks ensure a reliable energy supply, while regulated operations provide stable revenue streams and support ongoing infrastructure modernization and system expansion. They enhance shareholders’ value through dividend distribution and buybacks, making them attractive options for defensive investors.
Demand for natural gas is increasing across the United States due to its cleaner-burning characteristics, which help lower carbon emissions compared with other fossil fuels. Its role as a reliable transition fuel is supporting higher consumption and long-term demand growth.
Amid the growing significance of gas distribution, let us discuss Southwest Gas SWX and Spire SR, two regulated utilities benefiting from the rise in natural gas demand and major infrastructure development investments, making them comparable in the utility space.
Southwest Gas benefits from its regulated structure, new rates and rise in natural gas demand, supporting its financial performance. SWX gains from ongoing economic development across its service territories, which is attracting new customers and supporting steady demand growth and revenue expansion. The company undertakes systematic capital investment to strengthen infrastructure, supporting rate base growth, enhancing service reliability and driving long-term growth. Supported by a constructive regulatory framework and growing energy demand, Southwest Gas is well-positioned to enhance shareholders' value.
Spire, supported by its regulated framework, benefits from a rate hike and an expanding customer base, supporting stable revenues and earnings growth. The company continues to optimize its portfolio through strategic acquisitions and the divestiture of non-core assets, enhancing operational focus, strengthening financial flexibility and creating attractive long-term growth opportunities. Its strategic capital investments plan supports infrastructure development and system reliability while driving rate base and long-term financial growth. With growing energy demand and a supportive regulatory environment, Spire is poised to generate steady cash flow and enhance shareholder value over the long term.
Southwest Gas and Spire are among the leading gas distribution utilities. Analyzing their fundamentals side by side can reveal which stock presents the most attractive investment opportunity.
SWX and SR’s Earnings Growth Projections
The Zacks Consensus Estimate for SWX’s earnings per share (EPS) is pegged at $4.27 in 2026 and $4.85 in 2027, suggesting year-over-year growth of 16.99% and 13.63%, respectively. SWX’s long-term (three to five years) earnings growth is currently pinned at 9.89%.
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The Zacks Consensus Estimate for SR’s EPS is pegged at $4 in 2026 and $5.51 in 2027, suggesting a year-over-year decline of 9.91% and growth of 37.75%, respectively. SR’s long-term earnings growth is currently pinned at 11.17%.
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Debt to Capital
The Zacks Utilities sector is highly capital-intensive, requiring continuous investments to modernize and maintain infrastructure, improve operational efficiency and serve rising energy demand. To fund these long-term projects, utilities rely on a combination of internally generated cash flows and debt raised from capital markets, enabling steady growth and dependable service to customers.
Southwest Gas’ debt-to-capital currently stands at 46.11%, below Spire 69.95% and the industry average of 54.47%. Both companies use debt to fund their business, with SR’s higher ratio indicating greater dependence on borrowed funds.
Return on Equity
Return on Equity (“ROE”) is a key financial metric that measures how efficiently a company utilizes shareholders’ funds to generate returns. A higher ROE reflects strong managerial efficiency in utilizing shareholder funds to create value and drive profit growth.
Spire’s current ROE is 9.49%, outperforming Southwest Gas, which reports a lower ROE of 6.95%. SR uses shareholder capital more efficiently and generates higher returns, though both companies’ returns remain below the industry average of 10.13%.
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Capital Investment Plans
Utilities operation is capital-intensive, as huge funds are required to develop infrastructure, enhance system reliability and maintain existing assets. Natural gas distribution utilities must continuously invest in pipelines, storage facilities and delivery networks to ensure safe operations, reliable service and compliance with evolving regulatory standards while meeting growing customer demand.
Southwest Gas aims to invest $6.3 billion in 2026-2030, of which nearly 73% is related to SWX and 27% to the Great Basin project. Spire plans to invest $4.8 billion during 2026-2030 to enhance service reliability, support infrastructure development and rate base growth.
Price Performance
Southwest Gas' shares have gained 5.8% in the past three months against the Spire 12.9% decline.
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Wrapping Up
Southwest Gas and Spire are benefiting from rising natural gas demand, customer growth, rate increases and significant infrastructure investments, enabling them to reliably serve millions of customers across the United States.
Southwest Gas is supported by stronger earnings estimate revisions, a better capital spending program, a lower debt-to-capital ratio and superior stock price performance, make it a more attractive choice in the utility sector.
Based on the above discussion, Southwest Gas currently has an edge over Spire, though both presently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Southwest Gas Corporation (SWX): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).