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BofA Downgrades Spire On Lower Estimates, Valuation

Bill Haddad

Uncertainty over Spire Inc (NYSE: SR)’s St. Louis pipeline and a lack of many other near-term growth prospects led Bank of America Merrill Lynch to downgrade the Missouri-based utility company in a Friday note. 

The Analyst

Bank of America Merrill Lynch’s Dennis Coleman downgraded Spire from Buy to Neutral and lowered the stock’s price target from $75 to $72.

The Thesis

Despite first-quarter results that were above consensus estimates, the Missouri rate case impact and rebasing of Spire's long-term growth rate led BofA to lower estimates, Coleman said in a Friday note.

Uncertainty surrounding the utility's St. Louis pipeline timeline also remains in relation to the certificate of approval from the Federal Energy Regulatory Commission, Coleman said. Additional delays could push back the project’s in-service date, the analyst said.

“We incorporate capex and expected contribution from STL in our estimates but note it could be further delayed as many other pipeline projects have been in recent years.”

Spire is exploring other pipeline opportunities in Missouri and Alabama, but no decisions have been made yet, said Coleman.

BofA does not view Spire as a M&A target and does not include a premium in its valuation.

“We think SR should trade in line with peers due to its stable regulated base utility business, but now see valuation as full given lower estimates.”

Price Action

Spire shares were up 0.62 percent at $72.90 at the time of publication Friday afternoon. 

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Latest Ratings for SR

Date Firm Action From To
May 2018 Bank of America Downgrades Buy Neutral
May 2018 Stifel Nicolaus Maintains Hold Hold
Apr 2018 Morgan Stanley Maintains Underweight Underweight

View More Analyst Ratings for SR
View the Latest Analyst Ratings

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