Spire's Fully Regulated Pivot: A Cleaner Story Meets Missouri Weather
After divesting non-core assets, Spire bets on rate base growth and constructive regulation to deliver 5-7% EPS growth—but Missouri's weather normalization remains the swing factor.
SR · Earnings Call · 2026-08-05
A Cleaner, More Predictable Portfolio
Spire Inc. reached a strategic milestone this quarter, completing the divestiture of its marketing and storage businesses to become a pure-play regulated gas utility. As “Scott Doyle put it, "we have completed our transformation to a fully regulated company, enhancing our earnings quality and improving visibility of our long-term growth."” — Scott Doyle, President and Chief Executive Officer · 2026-08-05 This simplification reduces earnings volatility and should make the earnings story more straightforward for investors. The company also expects to sell its subscale Mississippi utility in the first quarter of fiscal 2027, further sharpening the portfolio.
The shift is reflected in the rate base-driven growth model management has articulated. With the non-regulated pieces gone, Spire's outlook now hinges on ~7% rate base growth and constructive regulatory mechanisms across its jurisdictions. The RSE renewal hearings in Alabama, a Missouri accounting authority order settlement, and the first annual review in Tennessee are all advancing as planned.
"We remain confident in our ability to deliver 5% to 7% long-term EPS growth, supported by our $11.2 billion capital plan while continuing to create long-term value for shareholders." — Adam Woodard
Three Regulatory Catalysts
Alabama. Spire Alabama and Spire Gulf are pursuing higher allowed ROEs in the upcoming RSE renewals, requesting 10.5% and 10.75% adjusting point ROEs, respectively. The hearings, scheduled for August 6-7, are focused on a limited set of items—ROE, ROE range, term, cost control mechanism, and customer charge. Management argues the requests are within regional norms, with “we feel comfortable with both our request and where we sit today.” — Scott Doyle, President and Chief Executive Officer · 2026-08-05 A favorable outcome would cement Alabama as a steady, forward-looking revenue environment.
Missouri. The accounting authority order settlement reached last week recognizes the need to improve the weather normalization adjustment rider (WNAR). This is critical because extreme winter weather in January decoupled usage from heating degree days, squeezing margins. Management framed the settlement as a collaborative step toward a durable solution, with “our desire there is to put in place a mechanism that both protects the company, but also protects the customer as well.” — Scott Doyle, President and Chief Executive Officer · 2026-08-05 The next test will be the first future test year rate case, expected to be filed in early November 2026.
Tennessee. Less than two months after closing, Spire Tennessee filed its first annual review mechanism requesting a $14 million revenue increase. The filing reflects a 9.8% authorized ROE and a $1.5 billion rate base, with new rates expected October 1, 2026. Management sees this as a low-controversy filing and expects the process to follow standard timelines.
The Missouri Weather Normalization Conundrum
The Missouri file is the key swing factor for Spire's near-term earnings quality. As management noted in the prepared remarks, the settlement does not immediately quantify or recover lost margin from the past winter—it instead commits to developing a more durable solution. During Q&A, Scott Doyle clarified: “the settlement does not contemplate either quantifying or recovery of the lost margin from this past year. The primary outcome of the settlement is a commitment to work towards a more durable and permanent solution.” — Scott Doyle, President and Chief Executive Officer · 2026-08-05 This leaves the recovery to the future test year case, where the company hopes to bring capital into base rates and recoup regulatory lag.
Financials and the Market's Reaction
Spire reaffirmed fiscal 2026 adjusted EPS guidance of $3.90–$4.10 and fiscal 2027 of $5.40–$5.60, with a long-term growth target of 5–7% off the fiscal 2027 midpoint of $5.75. Management also updated its FFO-to-debt target to 14–15% (from 15–16%), reflecting the reduced business risk after the divestitures; the current metric stands at 13%. The company expects to reach that target by the end of 2028.
The financial trajectory is supported by the latest reported quarter. Net income for the period was $282M, up 35% y/y, though this likely reflects the divestiture gains. Operating margins remain solid at ~30%, but the sharp increase in non-current debt (+72% y/y) highlights the balance sheet leverage from the Tennessee acquisition and the need for successful regulatory outcomes.
Despite the encouraging fundamentals, the stock has been under pressure. SR is down 14.3% over the past 90 days, with a 15% drawdown from its April peak. This suggests investors are waiting for more concrete proof that the regulatory constructs—especially in Missouri—will deliver on the promised EPS growth. With the Alabama hearings concluding this week and the Missouri filing expected this fall, the coming quarters will be pivotal.