Natural gas utilities reported another solid quarter of earnings to kick off 2021, with several gas distributors crediting winter storm tailwinds for profits that exceeded expectations and strong year-over-year gains.
Eight of nine gas utilities in a group selected by S&P Global Market Intelligence posted EPS that surpassed S&P Capital IQ consensus normalized earnings estimates. All of the companies posted year-over-year EPS gains, and five of those companies have now posted at least four consecutive quarters of earnings improvement.
The earnings period included February's devastating winter storms, which plunged parts of the Southern and Central U.S. into blackouts and contributed to dozens of deaths. The event led to a run on gas demand and extreme price spikes, resulting in sky-high gas purchase costs for some utilities.
New Jersey Resources Corp. surpassed Wall Street's expectations by the biggest percentage, posting EPS of $1.77 against consensus estimates of $1.22. The Garden State gas distributor also reported its fourth straight quarter of year-over-year EPS growth, increasing earnings per share by 58% in its fiscal second quarter.
The results were driven by earnings at its NJR Energy Services segment, where adjusted profits surged from $2.5 million a year ago to $96.5 million. The segment, which manages gas transportation and storage assets, reaped a windfall by selling gas held in storage in the Mid-Continent and Gulf Coast markets during February's historic cold snap.
The story was similar at St. Louis-based Spire Inc., which exceeded estimates by the second-greatest percentage within the group. Spire's gas marketing division increased storage positions heading into the 2020 winter season, allowing the unit to also take advantage of price volatility. Gas marketing earnings rocketed from $5.1 million a year ago to $39.8 million during Spire's fiscal second quarter. That drove a 35.4% year-over-year EPS increase, Spire's third consecutive quarter of per-share profit gains.
The results allowed both companies to increase their 2021 EPS guidance range. Spire said the marketing segment profit would also reduce its equity needs in 2022 and 2023.
"We do have these events once every five years or so," Spire Executive Vice President and CFO Steven Rasche said on a May 7 conference call. "It does give us the opportunity to take those funds and plow them back principally into the capex in the utility."
Portland, Ore.-based Northwest Natural Holding Co. also navigated the event to its benefit. The company leveraged a program that allows it to release gas supplies and pipeline and storage capacity held under contract when they are not needed to service Northwest Natural Gas Co. utility customers. Northwest Natural released those assets during the deep freeze, shielding customers from high gas purchase costs and helping to drive a 22.8% year-over-year increase in quarterly EPS.
Southwest Gas Holdings Inc.'s nonutility business also benefited from winter weather tailwinds, which drove the company's earnings above expectations and underpinned a 51% year-over-year EPS gain. Profits jumped at its Centuri Group Inc. utility infrastructure construction business, partly due to repair work following the first-quarter cold snap and tornadoes in and around Texas.
One of the utility operators most affected financially by February's winter storms, One Gas Inc., reported the group's only earnings miss and its weakest year-over-year EPS gain. New gas utility rates and customer growth in Texas and Oklahoma bolstered net margin. However, the company reported weak gas sales volume growth, partly due to fuel rationing and power outages that knocked out furnaces during the storms, executives said.
Atmos Energy Corp., which also shouldered heavy winter storm gas purchase costs, nevertheless posted the third-biggest earnings beat and continued the group's longest stretch of year-over-year gains. Executives credited new rates and customer growth, lower operations and maintenance spending, and a reduction in Atmos' annual effective tax rate.
Better-than-expected EPS reports also came out of UGI Corp., Chesapeake Utilities Corp. and South Jersey Industries Inc., all of which posted year-over-year per-share profit gains.