Ronald J. Barone
Southwest Gas Corporation (SWX) realized recurring 2Q10 EPS of $0.06 (excluding $3.6 million in corporate owned life insurance policy charges), surpassing our $0.02 EPS estimate and the Street’s $0.03 loss-per-share consensus estimate. Better than anticipated construction services performance and lower than expected depreciation expense largely drove the EPS beat.
Incorporating 2Q results, lower anticipated depreciation, and lower expected debt costs, we are lifting our 2010-2012 EPS estimates to $2.22, $2.26, and $2.55, from $2.17, $2.23, and $2.47, respectively. We note the rate design improvements SWX has recently achieved in Nevada and California (decoupling) and highlight management’s continued focus on such relief in Arizona. We maintain our $36 DCF (discounted cash flow) derived price target and Buy rating on the shares.
Wells Fargo Securities
Natural Resource Partners L.P. (NRP) reported Q2 2010 results that were well above our estimates as average coal royalty per ton and total coal production was above our expectations. Also, revenue from other operations such as coal processing fees, oil and gas royalties, and non-recoupable minimum payments were better than expected.
We are increasing our valuation range for NRP to $26-28 from $23-25. This increase is based on Q2 2010 results, an improved outlook for the coal markets, recent acquisitions, solid liquidity position and an increase to our distribution growth estimates.