Spire: Strong Buy

The key market mechanism is not the divestiture itself, but the compression of SR’s earnings dispersion. A cleaner regulated utility profile should lower its equity risk premium and make every incremental dollar of rate-base growth worth more to the market than the same dollar generated from merchant/storage exposure. In other words, the upside can come from multiple expansion before the EPS bridge fully shows up.

Near term, the stock can still look optically challenged because FY2026 is the “clean-up” year and utility investors often punish any step-down in reported earnings even when quality improves. The setup is better over 1-3 months into the next update cycle, where the market will care more about dividend coverage, allowed-ROE trajectory, and whether Tennessee integration is accretive on a regulatory basis than about the one-year EPS trough.

Second-order, this is constructive for the broader regulated gas utility cohort if investors start rewarding simplification over complexity; names with cleaner jurisdictional footprints could see a relative re-rate. It is less helpful for merchant storage/marketing and other commodity-linked utility hybrids, which lose the optionality premium as capital rotates toward lower-volatility cash flows. The contrarian risk is duration: if rates back up, a de-risked utility can still underperform on multiple compression even while fundamentals improve.