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Spire (SR) Gains on Systematic Investments & Strong Liquidity

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Spire Inc. (SR - Free Report) has been gaining from capital Investments to strengthen infrastructure, which will allow it to meet demand from customers efficiently. Strong liquidity and an expanding natural gas customer base are also likely to drive its performance over the long run.

Spire, which currently carries a Zacks Rank #3 (Hold), delivered an average earnings surprise of 62.8% in the last four quarters. SR’s long-term (three to five years) earnings growth is currently pegged at 5%. Moreover, Spire’s current dividend yield of 3.5% is better than the industry average of 2.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

Spire makes consistent investments to upgrade and maintain the existing infrastructure and expand operations. SR invested $624.8 million in fiscal 2021 and plans to spend $3.1 billion during the fiscal 2022-2026 period, with the current fiscal year’s expectation being $540 million. More than 98% of the planned investment is focused on long-term pipeline replacement programs, new business, technology and innovation, including the continued rollout of ultrasonic meters.

Spire continues to see a consistent increase in the average number of gas utility customer volumes over the past few years. At the end of fiscal 2021, the company’s customer volumes increased 0.7% year over year.

Spire had $360 million available for short-term financing on Mar 31, 2022, which is sufficient to meet near-term debt obligations. At the end of the second quarter of fiscal 2022, SR had a times interest earned (“TIE”) ratio of 3.6, up from 2.9 at the end of the second quarter of fiscal 2021. An improving TIE ratio is indicative of the company’s ability to meet debt obligations without any difficulty.

Headwinds

Spire’s dependence on operating units to generate sufficient net income to disburse dividends and repay loans is a concern as this can adversely impact the company’s financial position. Spire’s operations are exposed to cyber-security risks, thereby maximizing the chances of the misuse of confidential data. Also, adherence to strict environmental regulations and expenses to protect pipelines can significantly increase operating costs, which can materially impact Spire’s business.

Price Performance

In the past six months, shares of SR have rallied 23.0% compared with the industry’s 18.8% growth.

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Stocks to Consider

Some better-ranked stocks from the same sector are Sempra Energy (SRE - Free Report) , DTE Energy (DTE - Free Report) and American Electric Power (AEP - Free Report) , each carrying a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for 2022 earnings per share of Sempra Energy, DTE Energy and American Electric Power has moved up 0.6%, 0.8% and 5.7% year over year, respectively.

The long-term earnings growth of Sempra Energy, DTE Energy and American Electric Power is projected at 5.6%, 6% and 6.2% respectively.

SRE, DTE and AEP delivered an average earnings surprise of 2.8%, 9% and 2.4%, respectively, in the last four quarters.

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