Centuri's Independence Play: Why Southwest Gas' Share Sale Signals a Buying Opportunity

Southwest Gas Holdings’ decision to offload a chunk of its stake in Centuri Holdings (CTRI) has sparked a compelling opportunity for investors. By pricing its secondary offering at $17.50—a discount to CTRI’s current $19.60 trading price—Southwest Gas is both reducing its exposure to operational risks and signaling confidence in Centuri’s standalone potential. Meanwhile, the involvement of activist investor Carl Icahn, who bought $50 million of shares in a concurrent private placement, adds further credibility to the idea that Centuri is undervalued. Here’s why this move could be a catalyst for outsized returns.

Strategic Portfolio Optimization: Southwest Gas’ Bold Move

Southwest Gas, which previously owned 81% of Centuri, is executing a masterstroke in portfolio management. By selling 9 million shares (plus a potential 1.35 million via underwriter options), it’s shedding non-core assets to focus on its core utility business—a strategy that could unlock value for shareholders. The move reduces its exposure to Centuri’s operational headwinds, such as winter weather disruptions and declining offshore wind revenues, while freeing capital to invest in its core natural gas operations. This is a classic case of asset-light restructuring, where a parent company prioritizes its strongest assets while monetizing subsidiaries with uneven performance.

Icahn’s $50M Stake: A Contrarian’s Green Light

Carl Icahn’s involvement is a red flag for contrarian investors. The billionaire, known for betting on misunderstood companies, rarely places chips on a table without thorough due diligence. His $50 million private placement—occurring simultaneously with the secondary offering—suggests he sees Centuri as significantly undervalued at current levels. Icahn’s timing is also telling: he’s buying into the company just as Southwest Gas is stepping back, a move that could accelerate Centuri’s path to independence and higher valuations.

Q1 Results: A Mixed Bag with Hidden Strengths

While Centuri reported a net loss of $0.20 per share in Q1 2025, missing analyst estimates for a $0.10 loss, the story isn’t all doom and gloom. Adjusted EBITDA surged 20% to $24.2 million, driven by a 41.9% revenue jump in its high-margin Non-union Electric segment. The company’s backlog swelled to $4.5 billion—a 22% increase from year-end 2024—thanks to $1.2 billion in new contracts and renewals. This sets the stage for strong revenue visibility in 2025, even as the company navigates near-term headwinds like weaker U.S. Gas segment performance.

The current $19.60 price already reflects market skepticism about the offering’s undervaluation. But with a backlog-to-revenue multiple of ~1.6x (based on full-year guidance), Centuri’s operational momentum could push its valuation higher.

The Path to Independence—and a Higher Multiple

Southwest Gas’ reduced ownership (post-offering, its stake drops below 70%) is a critical step toward Centuri’s eventual independence. As the majority owner exits, Centuri gains autonomy to pursue growth initiatives without corporate parent constraints. This transition could attract investors who value its infrastructure-focused business model—a sector that’s outperforming in an era of energy transition and grid modernization.

Why Act Now?

• Technical Edge: The stock trades above the $17.50 offering price, but with a backlog-driven revenue ramp, it’s primed to outperform.
• Icahn’s Imprimatur: His contrarian bet adds a layer of safety for retail investors.
• Structural Shift: Reduced corporate ties could unlock a higher valuation multiple for Centuri’s standalone operations.

Risks to Consider

Weather-related disruptions and competitive pressures in its core markets remain risks. However, the company’s record backlog and EBITDA growth suggest these are manageable over the medium term.

Final Take

Southwest Gas’ secondary offering isn’t just about capital raising—it’s a strategic pivot to focus on its core utility business while setting Centuri up for independence. With Icahn’s seal of approval and a backlog-backed earnings story, now is the time to position for Centuri’s next leg up. The $17.50 offering price is already in the rearview mirror; the question is, how high will the market push it next?

The numbers are clear: Centuri is firing on all cylinders. Investors who act now could be buying into a turnaround story with activist backing and a clear path to higher valuations.