Spire reported 25Q2 GAAP EPS of $3.51, down from $3.58 in 24Q2. Non-GAAP, net economic EPS (NEEPS) was $3.60, up from $3.45. I had projected GAAP and NEEPS of $3.75. Operating revenues of $1.05 billion were down 6.8% YOY and 8.9% below my estimate, mostly due again to lower purchased gas adjustments at Spire Missouri.
By segment, Gas Utility economic earnings rose 3.8% YOY, but were 2.3% lower than I expected. Gas marketing earnings fell 4.5% and were only 60% of what I had projected. Management attributed the shortfall to low natural gas price volatility. Midstream’s earning rose four fold, nearly twice what I expected, due to new business from increased storage capacity and higher rates on contract renewals. Other costs were moderately higher and higher than I had projected. Despite all the variances, management reaffirmed its full year NEEPS guidance of $4.40-$4.60 and long-term economic EPS growth target of 5%-7%. My projections, which are in line, anticipate 2025 GAAP EPS of $4.50 and NEEPS of $4.52, up $0.02 from my previous report. My 2026 projections of $4.73 and $4.76, respectively, are essentially unchanged.
This was the second consecutive quarter of disappointing results for Spire. A key reason for the shortfall was the failure of the weather adjustment mechanism to compensate for lower than expected volumes, which management expects to address during its current rate case. In that regard, management said that the staff at the Missouri Public Service Commission proposed a settlement of a $246 million annual revenue increase, below the requested $290 million increase, reflecting a lower proposed return on equity (9.63% vs. the requested 10.5%) and a lower equity ratio of 53.19% vs. 55%. Negotiations are ongoing, but it will probably be difficult to improve materially upon the PSC’s offer.
Since my last report (4/25), Spire’s stock has declined 3.6%, underperforming the S&P Mid-Cap 400’s 5.5% advance and the Dow Jones U.S. Gas Utility Index flat performance. Gas utilities have been a safe haven during downtrends, but have underperformed on rebounds. Even so, Spire’s especially weak relative performance was due mostly to its disappointing 25Q2 performance. It may take some time for Spire to demonstrate progress on its near-term objectives because the next two quarters are seasonally slow and Spire is expected to post net losses.
Narrowing Spire’s valuation discount vs. peers over the next 6-12 months – the basis for raising my price target to $85 a month ago – seems less likely now given the disappointing results and the stock’s underperformance. I am therefore reducing the price target to $78, which equates to 16.5 times projected 2026 earnings, in line with the current one-year forward valuation. The new price target represents a potential total return of 9.3%, including the 4.2% dividend yield; so I am lowering my performance rating from “2” (Outperform) to “3” (Neutral).
This is a summary of Lark Research’s recent report on Spire Inc. (SR). To obtain a copy of the report, please reach out to Steve Percoco using the contact information provided below.
June 20, 2025 (Report published on May 21, 2025.)
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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