Spire reported a 24Q4 GAAP loss of $0.51 per share, better than 23Q4’s $0.66 loss. Its non-GAAP, net economic loss per share (NEEPS) was $0.54, also improved over 23Q4’s $0.78 loss, but worse than my $0.41 loss estimate. Operating revenues of $293.8 million were down 5.3% YOY and 8.0% below my estimate.
The results were also below management’s expectations. The shortfalls in both revenues and earnings were primarily due to Gas Marketing, which has suffered headwinds from poor natural gas market fundamentals, and to a higher than anticipated loss at Corporate, due mostly to higher interest expense. Yet, the net economic loss at the Gas Utility segment was at the low end of guidance, while NEE for the Midstream segment was at the high end of guidance.
Management is striving to deliver more consistent financial results going forward. It has confidence in its ability to deliver on its 10-year, $7.4 billion capital spending plan to upgrade its infrastructure (and improve system reliability), complete the installation of advanced meters in Missouri and generate new business. It continues to work with regulators and other key stakeholders to strengthen its capital spending recovery mechanisms, while also reducing operating costs to minimize the impact on customer bills. Through this 10-year plan, Spire expects 7%-8% average annual growth in its rate base, which supports its long-term NEEPS average annual growth target of 5%-7%.
The company has set 2025 NEEPS guidance at $4.40-$4.60 per share. At the midpoint, that represents a 9% increase from 2024’s $4.13, above its 5%-7% target and a catch up from 2024’s 2.0% NEEPS growth. 2025 segment NEE targets imply a 12% increase at Gas Utility and a 28% increase at Midstream, but a 1.7% decline at Gas Marketing and a 9% wider loss at Corporate. My fiscal 2025 projections, which are consistent with guidance, anticipate GAAP EPS of $4.47 and NEEPS of $4.50, up from $4.36 and $4.39 previously. For fiscal 2026, I am projecting GAAP EPS of $4.73 and NEEPS of $4.75, both up 5.6%. My 2026 projections assume an increase in total segment NEE of 7.3%.
Since my last report (10/20), Spire’s stock has risen 12.5%, outperforming the gains of 6.0% in the S&P Mid-Cap 400 and 8.0% in the Dow Jones U.S. Gas Utility Index. Yet, at 16.3 times projected 2025 NEEPS, it still trades at a discount to its peer group’s average forward multiple of 18.0 times, so there is still room for catch up.
The stock closed today at $73.38, above my $71.00 price target. I am therefore raising my price target to $77.00. That equates to 16.3 times projected 2026 GAAP EPS of $4.72 (or 16.1 times NEEPS of $4.75). At today’s closing price, the potential total return is 9.2%, including the stock’s 4.3% dividend yield. Accordingly I am reducing my performance rating from “2” (Outperform) to “3” (Neutral). With such a strong run over the past five weeks, the stock is clearly overbought, with an RSI of 77. Thus, it may need to rest before advancing further.
This is a summary of my recent update report on Spire Inc. (SR). To obtain a copy of the report, please reach out to me using the contact information provided below.
December 2, 2024 (Report published on November 25, 2024.)
Stephen P. Percoco
Lark Research
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