On Tuesday, Mizuho (NYSE:MFG) Securities updated its outlook on Spire Inc. (NYSE: NYSE:SR) shares, raising the utility company's price target to $65.00 from $62.00, while keeping a Neutral rating on the stock. The firm noted that Spire's shares have experienced a steady year-to-date increase of 9.1%, yet have not kept pace with the broader utility sector, which has seen the Utility Index (UTY) climb 22.7% and Local Distribution Companies (LDC) advance 24.4%.
The analysis pointed out that Spire is currently trading at a five-year record next twelve months (NTM) price-to-earnings (P/E) discount compared to its LDC peers. This underperformance is attributed to what Mizuho describes as "inconsistent execution," specifically referring to the company's adjustment of its fiscal year 2024 adjusted earnings per share (EPS) guidance during its third fiscal quarter update. The guidance was lowered from a midpoint of $4.35 per share to $4.20 per share.
The downgrade in guidance follows a previous reduction in forecasts for Spire's Utility segment, which is the core regulated business of the company. Mizuho anticipates that the challenges for Spire will likely intensify before any improvement is seen, forecasting subdued fiscal year 2025 guidance ahead of a potential rate case in Missouri that could reignite growth in fiscal year 2026.
The report also suggests that Spire's struggles can be partially explained by its heavy focus on the Missouri market. However, the firm expects additional challenges due to a higher rate environment that may continue to weigh on the fiscal year 2025 outlook.
Mizuho concludes by reiterating its Neutral stance, indicating a wait-and-see approach for more consistent performance and an improved balance sheet from Spire. The new price target reflects higher estimates for fiscal year 2026.
In other recent news, Spire Inc. has announced a change in its executive team with Adam Woodard set to take over as CFO in 2025, succeeding Steve Rasche. The company has also been the subject of a downgrade from Ladenburg Thalmann, moving from Neutral to Sell due to regulatory uncertainty. This downgrade follows a whistleblower complaint alleging disposal of relevant documents by Spire's regulatory staff.
In financial developments, Spire Missouri, a subsidiary of the company, issued $320 million in First Mortgage Bonds due 2034, aimed at managing debt and supporting general corporate purposes.
Moreover, Spire reported a reduction in its net economic earnings loss for the fiscal third quarter of 2024, moving to a loss of $0.14 per share from a $0.42 per share loss the previous year. The company attributes this improvement to cost management strategies and economic development initiatives, including the recent acquisition of MoGas and the inclusion of Salt Plains. These are the latest developments in Spire's ongoing strategic initiatives.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Mizuho's analysis of Spire Inc. (NYSE: SR). Despite the challenges highlighted in the report, Spire maintains a strong dividend profile. An InvestingPro Tip reveals that the company has raised its dividend for 21 consecutive years and has maintained dividend payments for an impressive 54 consecutive years. This consistency in dividend growth could be attractive to income-focused investors, especially given the current dividend yield of 4.6%.
The company's P/E ratio stands at 16.15, which aligns with Mizuho's observation of Spire trading at a discount compared to its peers. Moreover, InvestingPro data shows that Spire's revenue for the last twelve months as of Q3 2024 was $2,609.6 million, with a slight decline in revenue growth of -2.27% over the same period.
While Mizuho points out execution inconsistencies, an InvestingPro Tip indicates that analysts predict the company will be profitable this year, suggesting some optimism about Spire's financial performance. For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Spire's investment potential.
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