Spire (SR) Q1 2026: Utility Earnings Jump 33% as Rate Actions and Portfolio Streamlining Advance
Spire’s first quarter saw a marked 33% YoY surge in utility segment earnings, propelled by new rates and disciplined execution on portfolio simplification. The company is leveraging regulatory wins and targeted CapEx to reinforce its core gas utility model, while navigating asset sales and a major Tennessee acquisition that will reshape its scale and focus. Management’s reaffirmed EPS growth targets and capital plan signal confidence, but integration and regulatory execution remain key watchpoints for forward quarters.
Summary
- Rate Actions Drive Utility Outperformance: New Missouri and Alabama rates underpin robust earnings growth.
- Portfolio Simplification in Motion: Asset sales and Tennessee acquisition are set to reshape business mix.
- EPS Growth Targets Reaffirmed: Management maintains long-term 5% to 7% adjusted EPS growth outlook.
Performance Analysis
Spire’s Q1 financial performance was anchored by its regulated gas utility operations, which delivered $104 million in earnings, up over 33% YoY, driven by new rates in Missouri and margin expansion in Alabama under the Rate Stabilization and Equalization (RSE) mechanism. These gains were partially offset by higher operating and maintenance, depreciation, and interest expenses, as well as lower weather-related margin in core territories. The gas marketing segment contributed $4.5 million, benefiting from portfolio optimization, while midstream earnings rose modestly on expanded storage capacity.
Capital deployment remains disciplined, with $230 million invested in the quarter, largely directed to utility infrastructure modernization and new connections. This CapEx was lower YoY as Spire nears completion of advanced meter upgrades and wraps up storage expansion. The company’s $11.2 billion 10-year capital plan continues to drive rate base growth—approximately 7% in Missouri, 7.5% in Tennessee, and 6% in Alabama and Gulf—supporting the reaffirmed 5% to 7% long-term EPS growth target.
- Utility Segment Expansion: New rates and regulatory mechanisms delivered a $26 million YoY uplift in utility earnings.
- Cost and Margin Pressures: Higher O&M, depreciation, and interest expense partially offset rate-driven gains.
- CapEx Moderation: Lower capital outlay reflects completion of major upgrade projects, freeing up resources for integration and new growth.
Overall, Spire is executing a measured capital and regulatory strategy that has translated into tangible earnings growth, but the business is entering a pivotal phase as it integrates a major acquisition and pursues asset sales to focus its portfolio.
Executive Commentary
"The strong year-over-year improvement reflects solid execution in our gas utility business, supported by new rates across all of the utilities. Our marketing and midstream segments also delivered meaningful contributions. Just as we've discussed on prior calls, cost management and customer affordability remain central to our strategy."
Scott Doyle, President and CEO
"We are reaffirming our 5% to 7% long-term adjusted EPS growth target, supported by strong rate-based growth across Missouri and Tennessee, steady regulated equity growth in Alabama and Gulf, and our 10-year $11.2 billion CapEx plan."
Adam Woodard, Executive Vice President and CFO
Strategic Positioning
1. Regulatory and Rate-Driven Growth
Spire’s core strategy is anchored in regulatory execution and disciplined rate case management. New Missouri rates and Alabama RSE updates are driving earnings expansion, while the upcoming Missouri future test year case is expected to further align revenue with investment. The company’s ability to secure constructive regulatory outcomes is central to its margin profile and capital recovery.
2. Portfolio Simplification and Asset Sales
Management is prioritizing simplification by evaluating the sale of natural gas storage assets, with the process extending longer than anticipated but drawing “very good interest” from the market. Spire aims to announce a decision before the Tennessee acquisition closes, using proceeds to reduce equity needs and streamline the business toward regulated utility operations.
3. Tennessee Acquisition and Integration
The pending acquisition of Piedmont’s Tennessee business will expand Spire’s regulated footprint, offering scale benefits and the ability to spread shared services over a larger base. Integration planning is advanced, with an 18-month transition services agreement in place to ensure operational continuity for customers and employees. Management emphasizes the company’s experience with similar integrations but acknowledges the complexity and resource intensity required post-close.
4. Capital Allocation and Financing Discipline
Spire’s capital plan is tightly managed, with recent issuances of $900 million in junior subordinated notes and $825 million in senior notes for the Tennessee transaction. The company expects minimal common equity needs and has structured its financing to maintain current credit ratings. The redemption of preferred stock is expected to have a neutral net EPS impact, as clarified in the Q&A.
5. Operational Resilience and Customer Focus
Winter Storm Firm tested Spire’s operational capabilities, with the utility delivering gas equivalent to 31 GW of electric generation at lower customer cost. Management highlighted the effectiveness of its hedging and purchasing strategies in protecting customers from market volatility, reinforcing the reliability and affordability narrative for natural gas.
Key Considerations
Spire’s quarter illustrates a business in transition, balancing robust regulated earnings with the need to optimize its portfolio and integrate significant new assets. The company’s forward path hinges on regulatory agility, operational execution, and disciplined capital deployment.
Key Considerations:
- Rate Base Growth Trajectory: Ongoing CapEx and regulatory outcomes will determine the pace of future earnings expansion.
- Asset Sale Timing and Value: The outcome of storage asset sales will influence both leverage and capital allocation flexibility.
- Integration Execution Risk: The Tennessee acquisition presents both scale opportunities and operational complexity; successful integration is not guaranteed.
- Regulatory and Legislative Environment: The upcoming Missouri rate case under new future test year legislation is a key inflection point for revenue stability and growth.
- Financing and Balance Sheet Management: Spire’s ability to maintain targeted FFO to debt ratios and avoid dilutive equity issuance will shape investor confidence.
Risks
Spire faces execution risk around the Tennessee integration, potential delays or suboptimal pricing in storage asset sales, and the need to secure constructive regulatory outcomes in upcoming rate cases. External pressures such as commodity price volatility, rising interest rates, and evolving regulatory frameworks also pose ongoing risks to margin stability and capital recovery. Management’s ability to deliver on its growth and integration narrative will be tested over the next several quarters.
Forward Outlook
For Q2 2026, Spire guided to:
- Continued execution of the Tennessee acquisition and integration planning
- Announcement of storage asset sale decision before close of Tennessee transaction
For full-year 2026, management reaffirmed guidance:
- Adjusted EPS of $5.25 to $5.45 per share, including full-year storage earnings and pending Tennessee acquisition
Management highlighted several factors that will drive results:
- Regulatory filings and rate case outcomes, especially in Missouri
- Effective capital deployment and cost management to support customer affordability
Takeaways
Spire’s Q1 demonstrates the power of regulatory and rate-driven growth, but the business is at a strategic crossroads as it refocuses on regulated utilities and executes a transformative acquisition.
- Portfolio Transition: Asset sales and the Tennessee acquisition will reshape Spire’s business mix, with implications for scale, capital intensity, and risk profile.
- Regulatory Execution: Constructive rate case outcomes and disciplined capital recovery remain the cornerstone of earnings growth and investor returns.
- Integration and Simplification: Success in integrating Tennessee and divesting storage assets will be critical for delivering on the reaffirmed 5% to 7% EPS growth target.
Conclusion
Spire delivered a strong start to fiscal 2026, with utility earnings surging on the back of regulatory wins and operational resilience. The company’s next phase will be defined by how well it executes on integration, asset sales, and regulatory strategy to sustain its growth trajectory and streamline its portfolio for the future.
Industry Read-Through
Spire’s quarter highlights the enduring value of regulated gas utilities with disciplined rate recovery and targeted CapEx, especially in volatile energy markets. The trend toward portfolio simplification and focus on core regulated assets is resonant across the utility sector, as operators seek scale, cost efficiency, and regulatory clarity. Upcoming rate cases under new legislative frameworks, such as Missouri’s future test year, will be closely watched by peers for their impact on revenue stability and capital planning. The operational response to extreme weather events further underscores the reliability narrative for natural gas in the energy transition debate.