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Transcript Summary

Spire Inc.’s Q2 2026 call detailed the company’s strategic transformation into a pure-play regulated natural gas utility. Major milestones included the closing of the Piedmont Tennessee acquisition and the divestiture of non-core marketing and storage assets. While Q2 adjusted EPS rose to $3.76, driven by rate recoveries in Missouri and Alabama, the company lowered its full-year 2026 guidance to $3.90–$4.10. This revision is primarily due to exceptionally mild winter weather in Missouri, which caused a volumetric margin shortfall that existing normalization mechanisms could not fully offset. Spire has filed for an Accounting Authority Order to defer these losses. Despite this short-term challenge, Spire reaffirmed its long-term 5–7% growth target and its 2027 EPS guidance of $5.40–$5.60, supported by an $11.2 billion 10-year capital plan. Analysts questioned the effectiveness of weather normalization and the sudden sale of Spire Mississippi, which management described as a move to divest a subscale asset to a better-positioned owner. The company also lowered its FFO-to-debt target to 14–15%, reflecting its reduced business risk profile post-divestiture.

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Spire Inc.: A High-Voltage Acquisition Gamble Powered by Regulatory IOUs

Full Earnings Call Transcript — Q2 • 2026-05-06

Operator: Good day.
Operator: And welcome to the Spire Inc. Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Megan L. McPhail, Managing Director, Investor Relations. Please go ahead, ma'am.
Megan L. McPhail: Good morning, and welcome to Spire Inc.'s fiscal 2026 second quarter earnings call. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There is a slide presentation that accompanies our webcast, which can be downloaded from our website. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements regarding our expectations, plans, and objectives for future performance, future operating results, earnings guidance, capital investment plans, and the expected timing and benefits of, and risks associated with, acquisitions, dispositions, and related integration and transition activities, including the acquisition of the Piedmont Natural Gas Tennessee business; the sale of Spire Marketing; and the announced sales of Spire Storage and Spire Mississippi. Our forward-looking statements on today's call speak only as of today, and we assume no duty to update them unless required by law. Although our forward-looking statements are based on estimates and assumptions that we believe are reasonable, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing non-GAAP measures used by management when evaluating our performance and results of operations. I want to highlight that our results and guidance discussed today are presented on a continuing operations basis. This reflects the classification of Spire Marketing and Spire Storage as discontinued operations and is intended to provide a view of the earnings profile of the business going forward. As a part of this change, we are no longer presenting separate midstream or gas marketing segments in results or segment earnings guidance. The MoGas pipeline, which was previously reported in the Midstream segment, is now included in Corporate and Other. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. On the call today are Scott Edward Doyle, President and Chief Executive Officer, and Adam W. Woodard, Executive Vice President and Chief Financial Officer. With that, I will turn the call over to Scott Edward Doyle. Scott?
Scott Edward Doyle: Good morning, and thank you for joining us. This has been an exciting and transformative period for our company. Since announcing the acquisition of Piedmont Tennessee on July 29, 2025, we have successfully closed that transaction and taken decisive steps to further strengthen our portfolio. We announced agreements to sell Spire Storage and Spire Mississippi along with the sale of Spire Marketing, which have enabled us to fund the Tennessee acquisition without the need for external equity, while also sharpening our strategic focus on our regulated gas utility businesses. Together, these actions enhance the quality and visibility of our earnings, improve our overall risk profile, and position the company for more consistent long-term value creation. I want to take a moment to thank our colleagues at Spire Marketing for their professionalism, dedication, and meaningful contribution over many years. Their work supported our customers, strengthened the organization, and helped to position the company for success in the future. Turning now to performance for the quarter on slide four. On a continuing basis, we delivered second quarter adjusted earnings per share of $3.76 compared to $3.17 in the prior year. Underpinning that result is what we focus on every day: safe, reliable natural gas delivery along with continued disciplined cost management and customer affordability. On the regulatory front, we received approval from the Missouri Public Service Commission for a $16.5 million increase in our Infrastructure System Replacement Surcharge, or ISRS, request. Rates were effective in March and are supporting cash flow and recovery on infrastructure investment. In addition, in March, we filed an accounting authority order, or AAO, with the Missouri PSC related to the impact of lower weather-driven usage we experienced during the winter months. Adam will touch on our proactive approach to addressing these extraordinary conditions in a moment. Looking ahead, we are providing a fiscal 2026 adjusted EPS guidance range on a continuing operations basis of $3.90 to $4.10 per share. At the same time, we are reaffirming fiscal 2027 adjusted EPS guidance, which includes results from Spire Tennessee; our 5% to 7% long-term growth target; and our $11.2 billion 10-year capital plan. This underscores the durability of our strategy and the strength of our regulated growth platform. Slide five highlights our strategic approach concentrating the company around our core regulated gas utility businesses. Today, our business profile is centered on regulated gas utilities and our FERC-regulated pipeline, with growth driven by disciplined capital investments. With the sales of our non-core activities including marketing and storage, we have removed market-based earnings exposure from our growth profile. As a result, the company's earnings profile has become more straightforward and more predictable, with improved long-term earnings visibility. Looking ahead, long-term growth is anchored in our regulated utility, supported by rate base growth and constructive regulatory mechanisms. Moving to slide six. Building on our key messages and new business profile, I want to take a moment to walk through our 2026 business priorities, which reflect the recent actions we have taken and how we are managing the business going forward. First, operational excellence remains core to our strategy. We continue to focus on the safe and reliable delivery of natural gas, disciplined deployment and recovery of capital across our regulated utilities, and maintaining a strong emphasis on customer affordability through effective cost management. From a regulatory perspective, we remain focused on achieving constructive outcomes across our jurisdictions while continuing to advance the regulatory path forward in Missouri, including preparation for a future test-year rate case filing later this year. Financially, our priority is to deliver adjusted earnings within our fiscal 2026 guidance range from continuing operations, maintaining balance sheet strength, and a disciplined approach to financing. Finally, from a strategic transactions and integration standpoint, we are executing against our priorities—successfully integrating Spire Tennessee, divesting non-core assets, and maintaining our focus on regulated utility growth, reliability, customer affordability, and long-term shareholder value. Together, these priorities support a simpler, more concentrated business mix with improved earnings visibility and a strong foundation for long-term growth. Turning now to slide seven for an update on the Tennessee acquisition. We completed the transaction on March 31, marking an important milestone for Spire Inc. The approval process with the Tennessee Public Utility Commission took just six months from filing, highlighting the constructive and efficient regulatory environment, with continuity of rates and a clear framework that supports disciplined investment and long-term planning. With this acquisition, we have added Spire Tennessee to our portfolio as a leading regulated natural gas utility in one of the fastest-growing markets in the country. Spire Tennessee is now serving more than 200 thousand customers across the Greater Nashville area and surrounding counties. From a financing standpoint, the transaction is now fully funded without the need to issue common equity. The balance financing mix includes $900 million of junior subordinated notes, $825 million of Spire Tennessee senior notes, and proceeds from our recently announced asset sales. To bridge financing until the closing of the asset sales, we entered into an $800 million term loan to be paid as funds are received. Integration is also progressing smoothly. More than 200 employees transitioned to Spire at close, and we have an 18-month transition services agreement in place to support a seamless handoff. Our teams are already working closely together to align systems, processes, and safety practices. Overall, we are very pleased with the execution around this transaction—from financing to close to early integration—which we believe positions Spire Inc. well for long-term value creation. Moving to slide eight. The sales of our marketing, storage, and Mississippi businesses are deliberate actions to better align the company with where we see the strongest long-term value and the most consistent earnings profile. We reached agreements with strong buyers for each of these businesses. The sale of marketing to Boardwalk Pipelines was completed on April 30, just one month after announcement, and the transactions to sell storage and Spire Mississippi are expected to close in the coming months. From a capital standpoint, these sales generate meaningful cash proceeds, providing flexibility to fund the Tennessee acquisition and continue investing in our regulated infrastructure. More importantly, from a strategic perspective, these actions further concentrate Spire Inc. to regulated natural gas utilities where we have scale in each state. This improves our business risk profile and enhances earnings visibility while allowing management to stay focused on operating excellence, customer service, and disciplined growth. When these transactions are complete, Spire Inc.'s business portfolio will be fully regulated, positioning us well going forward and directly supporting our long-term strategy of investing in infrastructure, customer affordability, and delivering steady, predictable value for shareholders. Overall, we delivered solid second quarter results from our continuing operations, advanced our portfolio simplification strategy, and remain focused on executing in our regulated gas utilities. While lower weather-related usage in Missouri weighed on results, our underlying performance and long-term growth outlook remain intact. With that, I will turn the call over to Adam to walk through the financial results and our updated guidance in more detail.
Adam W. Woodard: Thanks, Scott, and good morning, everyone. I will begin with our quarterly results, which are presented on slide nine. With Marketing and Storage now classified as discontinued operations, the results we are presenting today provide a more straightforward and transparent view of our overall performance and the key factors driving performance. For the second quarter, we reported adjusted earnings of $224 million, or $3.76 per share, compared to $189 million, or $3.17 per share, a year ago. Gas Utility earnings totaled $235 million, an increase of over 20%, or $40 million, compared to the prior year, driven primarily by the implementation of new rates in Missouri and Alabama. Importantly, this increase reflects recovery of earnings on approximately $1 billion of incremental Spire Missouri rate base placed in service since rates were last updated. Favorable run-rate operations and maintenance expense performance also contributed to earnings growth. These benefits were partially offset by the impact of Spire Alabama customer refund provisions under the RSC framework, which include a reversal of a provision in 2025 and a refund provision in 2026. Lower customer usage in Missouri, net of weather mitigation, further offset earnings relative to the prior year, with current-year usage also coming in significantly below our expectations. Earnings were additionally impacted by higher depreciation expense and taxes other than income taxes, a portion of which is recovered through new Missouri rates as amortization schedules are updated. Interest expense was modestly higher in the current year, primarily reflecting higher long-term debt balances. Finally, Other activities reported an adjusted loss of $11 million, approximately $5 million higher than the prior year, reflecting higher corporate costs and higher interest expense in the current year. Turning to slide 10, let me walk you through the weather-driven usage impacts we have seen in Missouri so far in fiscal 2026, and how we are managing through them. Customer usage was materially below historical patterns and below the assumptions embedded in Missouri's weather normalization mechanism, driven by an unusually mild and uneven winter. Missouri heating degree days were 11.5% below normal through 2026, with residential usage per heating degree day during the winter heating season being 7% below 2024, which is the historical test year used to establish current billing determinants. The specific customer usage pattern we experienced was not fully mitigated by the weather normalization mechanism, and the lower-than-expected usage resulted in a margin shortfall versus our year-to-date expectations. In addition, Missouri rate design has shifted a greater portion of margin to the winter heating season, increasing sensitivity to weather and usage. We have been proactive on the regulatory front. In March, we filed an application for an accounting authority order with the Missouri Public Service Commission seeking recovery of the volumetric margin shortfall caused by this extraordinary weather pattern. This dynamic is the primary driver of the reduction in our full-year Gas Utility guidance. The margin impact is mechanical and weather-driven; it does not reflect any change in strategy or in the regulatory framework that continues to support our long-term growth plan. We are confident parties understand the significance of this shortfall and look forward to working with the Commission and other key stakeholders on a constructive solution. Turning to slide 11, today we are reaffirming our long-term 5% to 7% adjusted EPS growth target, anchoring to the original 2027 guidance midpoint of $5.75. This outlook continues to be supported by strong rate base growth in Missouri and Tennessee, steady regulated equity growth at Alabama and Gulf, and execution of our 10-year $11.2 billion capital plan. Focusing on near-term guidance, our 2026 adjusted EPS range from continuing operations is now $3.90 to $4.10 per share. This excludes earnings related to Marketing and Storage and, consistent with our previous guidance, also excludes any results from Spire Tennessee for the year. We are updating our adjusted earnings targets for the Gas Utilities segment and Other to reflect first-half results and expectations for the rest of the year. We are lowering the Gas Utility range to $275 million to $295 million, primarily due to the impact of lower usage and weather-related margin headwinds. We do not expect the year-to-date impact to change materially through the balance of the year due to the volumetric nature of our earnings. The Corporate and Other loss is expected to be in the range of $40 million to $46 million. That range includes earnings contributions for the MoGas pipeline and also reflects higher-than-anticipated interest expense due to the timing of financings, as well as allocated costs that remain following the divestitures. The rate design changes and updated amortization schedules implemented in the last Missouri rate case have shifted the intra-year earnings profile. While it is not our practice to provide quarterly guidance, we have outlined our expected earnings per share distribution for the remainder of the year on slide 11 to assist in quarterly modeling. Looking ahead to 2027, we are reaffirming our adjusted EPS range of $5.40 to $5.60 per share. This outlook reflects a full year of expected earnings from Spire Tennessee and excludes earnings from Storage, Marketing, and Mississippi. Overall, our earnings outlook remains firmly anchored by capital investment, constructive regulatory jurisdictions, and a regulated business profile. Moving to slide 12. In the first half of the year, we invested $386 million in capital expenditures driven by system upgrades, infrastructure modernization, and new business connections at the Gas Utilities. Year-over-year CapEx spending declined primarily due to the completion of the advanced feeder upgrade program in Eastern Missouri. We expect full-year 2026 capital expenditures of $797 million across our utilities, consistent with our 10-year $11.2 billion capital plan. These investments support rate base growth of 7% in Missouri and 7.5% in Tennessee, with 6% regulated equity growth in Alabama and Gulf. This disciplined long-term investment strategy underpins our confidence in delivering 5% to 7% adjusted EPS growth over time. On slide 13, we provided an update to our financing plan, which is largely consistent with what we previously outlined. In February, we issued $400 million of Spire Inc. senior notes, with proceeds used to refinance notes that matured March 1 and to support our ongoing general corporate needs. Importantly, following the recently announced divestitures and the resulting reduction in business risk, we have lowered our FFO-to-debt target to 14% to 15%. This adjustment better aligns our targets with the company's more focused regulated business profile, and we expect to achieve this over the next few years. That concludes our prepared remarks. We will now take your questions.
Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble the roster. The first question will come from David Arcaro with Morgan Stanley. Please go ahead.
Analyst: Hi, this is Alex Zimmerman on for Dave. Good morning. Starting with the weather normalization, what are your latest thoughts and your strategy to improve the weather normalization in Missouri? And is this something you would consider addressing in the next rate case?
Scott Edward Doyle: Good morning. Sure. A couple of things. As the comments that we made in the script indicated, we have filed an accounting authority order with the Commission. A procedural schedule has been put in place, with a hearing scheduled for September 9. We do believe that the Commission sees this as an important issue and one that we are spending time having dialogue on and providing information to them as we experienced the weather that we did. In the next rate case, there is also an opportunity to address it as well. For us, we are taking a look at the timing of the rate case. Our initial plan is to file in the fall, around November, but we will look at that timing depending on how we are able to work through this process with the Commission.
Analyst: Got it. Very clear. And then shifting to dividends—now that you have the funding of the Tennessee acquisition addressed and higher cash flow visibility from the regulated business, how are you thinking about the dividend trajectory going forward? And where do you see the optimal payout ratio for the company?
Adam W. Woodard: We remain unchanged there. The payout ratio, as we have said in the past, is typically in the 55% to 65% area, and we would expect the dividend to grow along with earnings.
Analyst: Perfect. Thank you so much.
Operator: The next question will come from Alex Kania with BTIG. Please go ahead.
Analyst: Good morning. Thanks for taking my questions. First question, as a follow-up on the accounting request—just want to make sure I understand the mechanics. Given the procedural schedule, it looks like it would be tough to have a sizable impact on earnings for this fiscal year. Is it just a question of recovering over time the cash representing the lost margin, or would it have a subsequent earnings impact in future years if the outcome goes as you requested? And second, post-divestitures of the Storage and Marketing businesses in particular, how do you think about the underlying cadence of growth that is possible here? In the past, Marketing and Storage were seen as relatively low growth. Now, shifting to the fully regulated footprint, do you think there is an opportunity to finance growth?
Scott Edward Doyle: Sure, Alex. Adam and I will collectively answer. On the mechanics of the AAO, traditionally the AAO sets up a regulatory asset for future recovery. That is how they traditionally work, and we will want to work with the Commission through this process and work toward a constructive outcome. With regard to the divestitures and our growth profile going forward, when you looked at how we invested in storage in the past, those were step-up opportunities as we made capital investments and then were able to pull that into earnings over longer periods of time. With those divestitures and now the concentration of the portfolio into utilities, we have a more normal growth trajectory that is centered on that 5% to 7% earnings profile. Adam, if you want to comment any more clearly about that?
Adam W. Woodard: It really would be rate base–driven and recovery-driven from there. As we have talked about, the relatively linear paths in each of our jurisdictions on a go-forward basis should create a pretty predictable growth trajectory.
Analyst: Great. Thanks very much.
Operator: The next question will come from Paul Fremont with Ladenburg. Please go ahead.
Paul Fremont: Thanks. My first question has to do with the fact that we thought weather normalization was dealt with in the last GRC. What exactly, in terms of the changes that you made, did not work?
Scott Edward Doyle: Good morning, Paul. Good question. We very directly worked on weather normalization in the last case. What we saw in this particular winter weather was really a decoupling of usage from the HDDs that underpin the usage assumptions that underpin the weather normalization adjustment. As a result, because that was extraordinary, that is why we filed the AAO in particular. We saw the greatest breakage taking place in January, where our usage was actually 28% lower than what our base year that is used to set up the weather normalization adjustment would indicate. Those are the reasons why we have put this back in front of the Commission—to both have a dialogue about it, quantify it, and work toward a constructive solution.
Paul Fremont: Is it possible, you believe, to get weather normalization that is essentially reflective of whatever change in usage actually occurs? And is that going to be your goal on a go-forward basis?
Scott Edward Doyle: Yes. That is the simple answer. I will let Adam comment a little more specifically.
Adam W. Woodard: Absolutely—that is the goal, Paul. It is frustrating for us as well that, as Scott mentioned, the usage set in the last GRC that went into effect last October was based off of 2024. We saw a very high correlation in the usage-per-HDD averages going into 2024 and off the 2024 numbers, and felt secure with that. As Scott mentioned, usage per HDD came down quite a bit over those two years.
Paul Fremont: What led to your decision to sell Mississippi? Clearly, it was not in any of your original plans that you shared with investors. Can you give us an idea of why, last minute, you announced the sale of the Mississippi subsidiary?
Scott Edward Doyle: Sure, Paul. This was something we had been in dialogue with Delta for quite some time leading up to the sale. As you know, the business that we have in Mississippi is subscale—18 thousand customers. There is quite a bit of capital investment that needs to take place, and the capacity of that customer base to support that investment can be challenged from time to time. By them folding into a larger utility within the state, it allows them to spread some of those costs over a broader base. As a result, Delta was a natural owner for them and it worked to a very good outcome. We still have to get approval—that is going to take a while this year as we go through the regulatory process—but we believe this is a benefit both to our customers and to Delta utilities as well. We look forward to bringing that to a conclusion later this year.
Paul Fremont: The timeline for getting a decision in your AAO filing—and if the decision is favorable, how would you treat the earnings impact for this year? Or would it be treated as non-operating?
Adam W. Woodard: Great question, Paul. It really depends on the timing of an order—we are getting closer to our September 30 year-end—as well as the wording of that order. Both of those elements would impact what we would recognize in earnings.
Paul Fremont: So a simple follow-up—if they were to agree to setting up a regulatory asset before your year-end, should we assume that could result in an adjustment in guidance for 2026?
Adam W. Woodard: It really depends on what the wording of that AAO is, Paul. There are a lot of things that dictate what our decision tree would look like on that.
Paul Fremont: Great. Thank you very much.
Scott Edward Doyle: Thanks, Paul.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Scott Edward Doyle for any closing remarks.
Scott Edward Doyle: Thank you again, everyone, for joining us this morning. We look forward to seeing many of you at the upcoming AGA Financial Conference later this month. Everyone have a good day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.