RGC Resources Reports Positive Earnings with Growth Prospects

Rgc Resources ((RGCO)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for RGC Resources conveyed a positive sentiment, underscored by achievements such as increased net income, robust gas volume growth, and effective operational performance during challenging cold weather conditions. Despite these successes, the company acknowledged some hurdles, including decreased equity earnings from affiliates and a rise in interest expenses. Economic uncertainty was also recognized as a potential threat moving forward.

Strong Main Extensions and Renewals

RGC Resources reported significant progress in its main extensions and renewals, having installed 1.1 main miles and connected 197 new services, compared to 185 in the previous year. The company also renewed 65 services, reflecting its ongoing commitment to safety and reliability in service delivery.

Increased Gas Volumes

The company experienced a 16% increase in total gas volumes, attributed to a 4% rise in residential and small commercial volumes due to a 10% increase in heating degree days. This growth highlights the company’s ability to meet increased demand efficiently.

Increased Net Income

Net income for the quarter rose to $5.3 million, or $0.51 per share, up from $5 million, or $0.50 per share, in the same period a year ago. This increase in net income underscores the company’s financial resilience and successful operational strategies.

Positive Customer Growth

RGC Resources is poised for continued growth, driven by steady housing expansion and new neighborhood developments. This growth is expected to result in further main extensions and new service connections, enhancing the company’s market presence.

Successful System Performance During Cold Weather

During one of the coldest Januarys in over a decade, the company’s systems operated without customer outages. This performance is a testament to the effectiveness of the company’s modernization and renewal efforts.

Lower Equity Earnings from Unconsolidated Affiliates

The company saw a decline in equity earnings from unconsolidated affiliates, which stood at $854,000 pre-tax, down from $1.5 million a year ago. This decrease was primarily due to the transition from the construction phase to the operational phase of MVP.

Higher Interest Expenses

RGC Resources faced higher interest expenses, increasing by $143,000 compared to the previous year. This rise was due to a higher average balance on the Roanoke Gas line of credit and increased interest rates on midstream debt.

Economic Uncertainty Concerns

The company acknowledged concerns over economic uncertainty and potential inflationary pressures arising from changes in the presidential administration and the Federal Reserve’s cautious approach to interest rates.

Forward-Looking Guidance

For the 2025 fiscal year, RGC Resources provided optimistic guidance, with a continuation of strong main extensions and renewal activities. The company plans capital expenditures of $21.5 to $22 million for the fiscal year and has maintained earnings per share guidance in the range of $1.18 to $1.25. The firm remains optimistic about growth opportunities in the Roanoke region, supported by a robust performance during the recent cold winter.

In summary, the RGC Resources earnings call highlighted a generally positive outlook with successful growth in net income and gas volumes. While challenges like decreased affiliate earnings and rising interest expenses were acknowledged, the company remains optimistic about future growth opportunities, supported by their effective operational strategies and robust performance during demanding weather conditions.