Critical Review: Suburban Propane Partners (NYSE:SPH) & Southwest Gas (NYSE:SWX)

Southwest Gas (NYSE:SWX) and Suburban Propane Partners (NYSE:SPH) are both utilities companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, risk, institutional ownership, profitability and dividends.

Insider & Institutional Ownership

92.8% of Southwest Gas shares are owned by institutional investors. Comparatively, 30.9% of Suburban Propane Partners shares are owned by institutional investors. 0.6% of Southwest Gas shares are owned by company insiders. Comparatively, 1.3% of Suburban Propane Partners shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and recommmendations for Southwest Gas and Suburban Propane Partners, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southwest Gas	0	1	6	0	2.86
Suburban Propane Partners	0	2	0	1	2.67

Southwest Gas presently has a consensus target price of $101.83, suggesting a potential upside of 23.13%. Given Southwest Gas’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Southwest Gas is more favorable than Suburban Propane Partners.

Profitability

This table compares Southwest Gas and Suburban Propane Partners’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southwest Gas	31.85%	6.79%	2.63%
Suburban Propane Partners	9.37%	18.57%	5.25%

Volatility and Risk

Southwest Gas has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500. Comparatively, Suburban Propane Partners has a beta of 0.43, indicating that its stock price is 57% less volatile than the S&P 500.

Dividends

Southwest Gas pays an annual dividend of $2.58 per share and has a dividend yield of 3.1%. Suburban Propane Partners pays an annual dividend of $1.30 per share and has a dividend yield of 7.8%. Southwest Gas pays out 33.7% of its earnings in the form of a dividend. Suburban Propane Partners pays out 66.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Earnings and Valuation

This table compares Southwest Gas and Suburban Propane Partners”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southwest Gas	$1.94 billion	3.09	$439.83 million	$7.66	10.80
Suburban Propane Partners	$1.39 billion	0.80	$106.57 million	$1.96	8.51

Southwest Gas has higher revenue and earnings than Suburban Propane Partners. Suburban Propane Partners is trading at a lower price-to-earnings ratio than Southwest Gas, indicating that it is currently the more affordable of the two stocks.

Summary

Southwest Gas beats Suburban Propane Partners on 12 of the 17 factors compared between the two stocks.

About Southwest Gas

Southwest Gas Holdings, Inc., through its subsidiaries, distributes and transports natural gas in Arizona, Nevada, and California. The company operates through Natural Gas Distribution, Utility Infrastructure Services, and Pipeline and Storage segments. It also provides trenching, installation, and replacement of underground pipes, as well as maintenance services for energy distribution systems. As of December 31, 2023, it had 2,226,000 residential, commercial, industrial, and other natural gas customers. Southwest Gas Holdings, Inc. was incorporated in 1931 and is headquartered in Las Vegas, Nevada.

About Suburban Propane Partners

Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, renewable propane, fuel oil, and refined fuels in the United States. The company operates through four segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, and All Other. The Propane segment is involved in the retail distribution of propane for space heating, water heating, cooking, and clothes drying for use as a motor fuel in internal combustion engines to power over-the-road vehicles, forklifts, and stationary engines, as well as to fire furnaces as a cutting gas to the industrial customers; and for tobacco curing, crop drying, poultry brooding, and weed control in the agricultural markets. It also engages in the wholesale distribution of propane to industrial end users. Its Fuel Oil and Refined Fuels segment engages in the retail distribution of fuel oil, diesel, kerosene, and gasoline to residential and commercial customers for use in primarily as a source of heat in homes and buildings. The Natural Gas and Electricity segment markets natural gas and electricity to residential and commercial customers in the deregulated energy markets in New York and Pennsylvania. The All Other segment sells, installs, and services a range of home comfort equipment, including whole-house heating products, air cleaners, humidifiers, and space heaters. The company serves residential, commercial, industrial, and agricultural customers primarily in the east and west coast regions of the United States, as well as portions of the Midwest region of the United States and Alaska. Suburban Propane Partners, L.P. was founded in 1945 and is based in Whippany, New Jersey.