Spire (SR) Q4 2025: EPS Guidance Jumps 20% on Missouri Rate Win, Tennessee Acquisition in Focus

2025-11-14 | By EarningsIQ Research

Spire delivered a pivotal year, raising 2026 EPS guidance by over 20% as regulatory wins and the upcoming Tennessee acquisition reshape the company’s growth profile. The Missouri rate case settlement and constructive legislative changes underpin improved returns, while disciplined capital allocation and a pending gas storage asset sale aim to fund expansion without diluting equity. With infrastructure investment and regulatory frameworks aligning, Spire’s long-term trajectory is increasingly defined by utility scale and rate base growth, but execution on integration and cost control will be critical as the business absorbs new assets and regulatory paradigms.

Summary

• Missouri Rate Case Unlocks Growth Trajectory: Constructive settlement and future test year legislation shift earnings power and planning flexibility.
• Tennessee Acquisition Integration Takes Center Stage: Seamless customer and employee transition prioritized, with financing mix and asset sales under review.
• Capital Plan Drives Utility-Led Expansion: Robust $11.2B decade-long pipeline and focus on regulated returns anchor Spire’s forward outlook.

Performance Analysis

Spire’s fiscal 2025 performance was defined by steady utility earnings growth, disciplined capital deployment, and an inflection in regulatory outcomes. Adjusted EPS rose 7.5% year-over-year, with gas utilities contributing nearly 85% of total segment earnings. The Missouri business saw a notable step-up in returns as capital was incorporated into base rates following a prolonged period of under-recovery, while the Alabama segment maintained near-allowed returns through its forward-looking RSE (Rate Stabilization and Equalization) mechanism.

Midstream and gas marketing delivered incremental value but remain strategically peripheral. Midstream earnings increased on capacity expansion and storage optimization, though higher costs and an expected storage asset sale will reduce future contribution. Gas marketing, contributing less than 10% of segment earnings, benefitted from market positioning but is not a growth lever in guidance. O&M (operations and maintenance) expense control remains a focus, with 2025 and 2026 both targeted below inflation, despite some fourth quarter pressure.

• Regulatory-Driven Margin Expansion: Missouri and Alabama rate mechanisms provided timely recovery and improved earnings visibility.
• Infrastructure Investment Scale: Nearly $1B deployed in 2025, with 90% directed at utilities, supporting system reliability and future rate base growth.
• Seasonal Volatility Remains: Q4 loss reflected typical seasonality and higher O&M, but full-year performance met or exceeded prior expectations.

Dividend growth (5.1% increase) and a 23-year streak signal management’s confidence in utility cash flows and regulatory stability.

Executive Commentary

Strategic Positioning

1. Regulatory Model Evolution

Missouri’s shift to a future test year framework marks a structural pivot for Spire’s ratemaking process. This approach, which sets rates based on projected instead of historical costs, will enable more proactive cost recovery and capital planning, reducing regulatory lag and supporting higher earned returns over time. Management expects the first future test year case to be filed in fall 2026, with impacts felt in subsequent years.

2. Tennessee Acquisition and Integration

The pending $922M Piedmont Tennessee acquisition will expand Spire’s regulated footprint and earnings base, with targeted closing in Q1 2026. The company is prioritizing a seamless transition for both customers and employees, leveraging an experienced integration team and an 18-month transition service agreement. Financing will rely on a balanced mix of debt, equity, and hybrid securities, with minimal common share issuance planned and a potential storage asset sale to fund the deal.

3. Capital Allocation and Asset Rationalization

Spire’s 10-year, $11.2B capital plan is overwhelmingly utility-focused, with 70% dedicated to safety and reliability and 19% to customer expansion. The company is actively evaluating the sale of its gas storage facilities, which comprise roughly two-thirds of midstream earnings, to recycle capital into the core utility business and maintain credit metrics. Management expects to announce a decision by year-end.

4. Discipline in Cost and Balance Sheet Management

O&M expense growth is targeted below inflation, a key commitment as Spire absorbs new assets and regulatory requirements. The company’s FFO (Funds From Operations)-to-debt ratio is managed with a 15-16% target, providing a buffer above rating agency downgrade thresholds. Equity needs through 2028 are described as “minimal,” with any required issuance managed through an at-the-market (ATM) program and hybrids.

5. Dividend Policy and Shareholder Returns

Dividend growth is aligned to long-term EPS growth (5-7% target), with a payout ratio in the 55-65% range, consistent with utility peers. The 5.1% dividend increase for 2026 reflects confidence in the sustainability of cash flows and the company’s ability to fund growth without excessive dilution.

Key Considerations

Spire’s fiscal 2025 results and outlook reflect a utility business at a strategic crossroads, balancing regulatory progress, major M&A, and disciplined capital allocation:

Key Considerations:

• Future Test Year Implementation: Missouri’s forward-looking ratemaking will reduce regulatory lag and may enhance allowed returns, but requires stakeholder education and process adaptation.
• Tennessee Acquisition Funding: Asset sale execution and hybrid security issuance will be critical to funding the transaction while protecting credit ratings and minimizing dilution.
• Cost Discipline Amid Integration: O&M expense control below inflation is a recurring theme, but integration of Tennessee will test Spire’s ability to maintain this discipline as scale and complexity increase.
• Rate Base and Earnings Visibility: Compound annual rate base growth of 7-7.5% in Missouri and Tennessee underpins the 5-7% EPS growth target, but execution on capital deployment and regulatory recovery is essential.
• Dividend Sustainability: The 23-year streak of dividend increases is a strong signal, but future growth depends on maintaining regulatory outcomes and funding expansion efficiently.

Risks

Execution risk is elevated as Spire integrates the Tennessee acquisition, manages a multi-jurisdictional regulatory environment, and executes asset sales to fund growth. Regulatory lag, cost inflation, and potential delays in rate recovery could pressure returns. Financing mix and asset sale outcomes will directly impact balance sheet strength and future equity needs, especially if hybrid or storage sale proceeds fall short of expectations.

Forward Outlook

For fiscal 2026, Spire guided to:

• Adjusted EPS of $5.25 to $5.45 (excluding Tennessee acquisition results, includes full year of gas storage earnings)
• Gas utilities segment earnings of $285M to $315M, reflecting the impact of new Missouri and Alabama rates

For full-year 2027, management provided:

• Adjusted EPS of $5.65 to $5.85 (includes full Tennessee, excludes storage earnings)

Management highlighted several factors that will shape the outlook:

• Missouri’s future test year rate case to be filed in fall 2026, with expected capital step-up but not reflected in 2027 guidance
• Decision on gas storage asset sale expected by year-end, which will impact future segment mix and financing needs

Takeaways

Spire’s 2025 results and guidance signal a company leveraging regulatory wins and disciplined capital allocation to drive utility-led growth, but integration and cost control will be tested as the business expands.

• Regulatory Model Shift: The move to future test year in Missouri is a structural positive, but its ultimate impact depends on execution and stakeholder collaboration.
• Acquisition and Asset Sale Execution: Funding the Tennessee deal without diluting equity hinges on a successful storage asset sale and hybrid issuance; delays or shortfalls could pressure the balance sheet.
• Ongoing Cost Control: Maintaining O&M discipline through integration is critical to delivering on the 5-7% EPS growth target and supporting dividend growth.

Conclusion

Spire exits fiscal 2025 with regulatory momentum, a clear capital plan, and a pending acquisition that will reshape its earnings base. While the utility growth story is intact and guidance is robust, investors should watch for execution on asset sales, integration, and cost management as the next stage of Spire’s evolution unfolds.

Industry Read-Through

Spire’s adoption of a future test year in Missouri and disciplined approach to funding M&A with asset sales and hybrids offer a playbook for regulated utilities seeking to balance growth and shareholder dilution. The emphasis on constructive regulatory frameworks, minimal regulatory lag, and cost control are increasingly critical as utilities face capital intensity and decarbonization pressures. Peers with aging infrastructure or pending acquisitions may look to Spire’s model for managing capital allocation, regulatory engagement, and dividend policy. The sector-wide move toward forward-looking ratemaking is likely to accelerate, with implications for rate base growth and investor returns across the industry.

SR Utilities Natural Gas Regulation Acquisition Dividend Capital Allocation