The biggest U.S. gas utilities benefited from customer additions, rate increases and acquisitions during the calendar second quarter, with many of the sector's companies beating their S&P Capital IQ consensus estimates.
Organic growth underpinned positive earnings at a number of utilities. New Jersey Resources Corp. substantially overshot the consensus estimate, reporting net financial earnings of 20 cents per share, more than double S&P Capital IQ's consensus normalized expectations. The company linked the earnings increase to higher base rates and customer additions at New Jersey Natural Gas Co.
Looking ahead, New Jersey Resources expects to add 26,000 to 28,000 new customers through fiscal 2019, which would be an annual growth rate of about 1.7%.
Northwest Natural Gas Co. d/b/a NW Natural also outperformed estimates during the quarter ended June 30, with consolidated net income of 10 cents per share, 4 cents higher than the S&P Capital IQ consensus estimate. Like New Jersey Natural Gas, NW Natural attributed its performance in part to customer growth. NW Natural executives pointed to a strong economy, continued conversions and increased penetration adding multifamily residences to the service territory.
At Sempra Energy, adjusted earnings reached $1.10 per share, exceeding the consensus by more than 26%. The company's utility and infrastructure businesses returned better earnings than expected, even by the company itself, which raised its full-year earnings guidance. Sempra executives cited higher earnings from LNG marketing activities, earnings from acquisitions and pipelines placed into service in Mexico, and earnings from domestic renewable assets that were placed into service in 2016, among other factors.
Rate activity propelled the quarter's results in some instances. PG&E Corp.'s earnings from operations of 86 cents per share beat the consensus estimate of 78 cents. Even though the second-quarter results included $50 million in costs that PG&E does not consider part of ongoing operations — such as cost disallowances by the regulator and pipeline right-of-way clearing — the company benefited from increased revenue allowed by a 2017 general rate case decision and part of a gas transmission and storage rate case kicking in.
Spire Inc.'s net economic earnings of 44 cents per share beat the consensus estimate by 6 cents, with the company's solid performance attributed in part to earnings from recently acquired EnergySouth Inc., along with organic growth at Spire's other utilities.
WGL Holdings Inc. beat consensus estimates, in part because subsidiary Washington Gas Light Co. benefited from new base rates in Virginia and Washington, D.C. WGL saw higher earnings from its alternative energy investments and midstream energy services segment, as well. These positives outweighed performance in the retail energy marketing segment, which saw substantially lower earnings compared with the same period in 2016 because of lower firm sales volumes, along with unfavorable basis spreads.
Acquisitions supported some of the utilities' positive quarterly results. Atmos Energy Corp. reported adjusted net income of 67 cents per share, compared with the consensus estimate of 66 cents per share. The company saw pipeline and storage gross profit increase, in part thanks to the addition of pipeline assets acquired from EnLink Midstream LLC.
The company also benefited from higher basis spreads associated with increased production in the Permian Basin. Atmos also was able to cut operating and maintenance costs, driven by lower legal expenses.
Dominion Energy Inc., NiSource Inc. and South Jersey Industries Inc. met consensus estimates exactly, while ONE Gas Inc. bucked the overall trend, with earnings 3 cents per share below the consensus estimate.
ONE Gas saw warmer than normal weather during the quarter and reported higher employee-related expenses, information technology expenses and pipeline maintenance costs. Rate increases in Texas and Kansas, modified rate-setting practices that accounted for weather in Kansas, and residential customer growth in Oklahoma and Texas all boosted ONE Gas' earnings for the quarter compared to the second quarter of 2016.