Spire Affirms Adj. Earnings Guidance

Spire reiterated fiscal 2026 adjusted EPS guidance of $5.25–$5.45 (excluding the pending Piedmont Natural Gas Tennessee business) and forecasted fiscal 2027 adjusted EPS of $5.65–$5.85, with FY2026 capex expected at $809 million. The company outlined an $11.2 billion 10-year capital investment target through FY2035 focused on Gas Utility infrastructure and new business, supporting a 5–7% long-term adjusted EPS growth rate using the FY2027 midpoint of $5.75 as the base; shares were modestly lower in pre-market trading at $84.88 (-0.57%).

Analysis

Market structure: Spire’s $11.2bn, 10-year capex tilt toward its Gas Utility segment makes it a relative winner among regulated gas utilities, EPC contractors, pipe/steel suppliers and local labor markets that will see step-up demand for the next 3–10 years. Short-term equity impact is muted (SR trading ~ $85 implies ~14.8x FY27 EPS of $5.75) but the deal pipeline (Piedmont Tennessee) increases scale and negotiating leverage in rate cases while keeping pricing power capped by regulators.

Risk assessment: Key tail risks are (1) state/regulatory rejection or onerous conditions on the Piedmont acquisition within 6–12 months, (2) an accelerated electrification/NG demand decline (>15% over a decade) and (3) a 100–200bp rise in rates that raises WACC and compresses valuations ~6–12%. Hidden dependencies include timing of rate-case approvals, capex overruns (10–25% risk on large projects) and pro forma leverage moves (watch net debt/EBITDA). Near-term catalysts: regulatory filings (next 90 days), FY2026 guidance execution and commodity/steel inflation data.

Trade implications: Direct bullish trade is tactical long SR (size 2–3% portfolio) targeting P/E re‑rating to 16 (price target ~$92 within 12 months) with stop-loss $75 or on deal rejection. Options: sell OTM cash‑secured puts (Dec 2026 $75 strike) to collect premium and set entry. Rotate 1–2% into XLU and 0.5–1% into XLB to capture regulated yield stability plus materials upside; avoid high‑leverage merchant gas names (net debt/EBITDA >4.0).

Contrarian angles: Consensus underprices regulatory and integration risk — markets are not paying for a failed acquisition scenario where pro forma leverage spikes >20% and forces equity issuance. Conversely the market may be underweight the supply-chain beneficiaries; if Spire executes and wins rate cases, a modest re‑rating to 16–17x is credible (8–15% upside) while downside is capped by regulated cashflows absent catastrophic policy shifts.

Key Decisions for Investors

• Establish a 2–3% long position in Spire (SR) equity at current levels (~$85), target $92 (12 months, P/E ~16 on FY27 EPS $5.75), set a hard stop-loss at $75 or reduce to 1% if regulatory approval for the Piedmont deal is denied within 9 months.
• Sell cash‑secured SR Dec 2026 $75 puts in size sufficient to build a 1–2% position if assigned (collect premium now; effective entry target ≈ $72–$74), only if implied vol < 40 IV rank.
• Overweight regulated utilities (XLU +2% weight) and materials (XLB +1% weight) for 6–18 months to capture steady yield and capex-driven materials demand; trim commodity/material exposure if steel prices fall >10% from current levels.
• Reduce/avoid holdings in high‑leverage, merchant gas/infrastructure names where pro forma net debt/EBITDA >4.0 or interest coverage <3x; trim those positions by 50% immediately and reassess after next 90‑day regulatory filings.