On Thursday, Ladenburg Thalmann adjusted its stance on Spire Inc. (NYSE: NYSE:SR), downgrading the stock from Neutral to Sell and reducing the price target to $60.50 from $65.50.
The decision follows a motion filed on October 8th by the Missouri Public Service Commission (MOPSC) Staff to investigate a whistleblower complaint from a former Spire employee. The complaint alleges that Spire's regulatory staff were instructed to hide or dispose of documents pertinent to an upcoming rate case.
The analyst from Ladenburg Thalmann highlighted the increased regulatory uncertainty as the reason for the downgrade, noting that the MOPSC will vote on whether to proceed with the investigation. The outcome and timing of the vote are expected to remain confidential. The next MOPSC Open Meeting, which is scheduled for today at 12 PM CST, may provide further details on the situation.
The whistleblower complaint, which became public on September 23rd, followed a discrimination lawsuit filed by the same former employee in April 2023. The lawsuit was settled when the employee resigned on September 4, 2024, on mutually agreeable terms, leading to the dismissal of the case. Spire conducted its own internal investigation into the whistleblower's allegations and reported finding no evidence of wrongdoing.
Spire anticipates that the potential investigation by the MOPSC Staff will not impact its upcoming Missouri rate case. Despite this, Ladenburg Thalmann has adjusted Spire's valuation, now applying a 5% discount to the gas utility's peer group, as opposed to the 5% premium it had previously assigned. This reflects the concerns over the potential regulatory issues that might arise from the whistleblower's allegations and the subsequent investigation.
In other recent news, Spire Missouri, a subsidiary of Spire Inc., has issued $320 million in First Mortgage Bonds due 2034, as part of a strategic financial move to manage its debt profile. The bonds, underwritten by BMO Capital Markets Corp., J.P. Morgan Securities LLC, TD Securities (USA) LLC, and U.S. Bancorp Investments, Inc., are set to redeem the company's existing $300 million Floating Rate Series First Mortgage Bonds due on December 2, 2024. The remaining funds will be used for general corporate purposes.
Spire Inc. also reported a significant improvement in its fiscal third quarter of 2024, narrowing its net economic earnings loss to $0.14 per share from the $0.42 per share loss in the same quarter of the previous year. This positive development is attributed to the company's focus on cost management strategies and economic development initiatives. Spire has revised its fiscal year 2024 earnings guidance to a range of $4.15 to $4.25 per share.
In addition, Spire's recent acquisition of MoGas and the inclusion of Salt Plains have positively contributed to earnings, while its marketing segment continues to grow. New rates in Missouri and Alabama have benefited the company's gas utilities, with a general rate case planned to be filed in Missouri in the fourth quarter of 2024. These are among the recent developments as Spire continues to focus on strategic initiatives to ensure long-term profitability and customer satisfaction.
InvestingPro Insights
In light of the recent downgrade and regulatory uncertainty surrounding Spire Inc. (NYSE: SR), investors may find value in examining additional financial metrics and expert insights. According to InvestingPro data, Spire's market capitalization stands at $3.86 billion, with a P/E ratio of 15.79, suggesting a relatively moderate valuation compared to industry peers.
Despite the current challenges, Spire has demonstrated a commitment to shareholder returns. An InvestingPro Tip highlights that the company has maintained dividend payments for an impressive 54 consecutive years. This long-term dividend consistency could provide some reassurance to investors during this period of uncertainty. Additionally, Spire's current dividend yield of 4.52% may be attractive to income-focused investors.
Another InvestingPro Tip notes that Spire generally trades with low price volatility, which could be a positive factor for risk-averse investors in the face of potential regulatory scrutiny. However, it's worth noting that the stock is currently trading near its 52-week high, with a price that is 98.21% of its 52-week peak.
For those seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Spire's financial health and market position.
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