On Thursday, Spire Inc. (NYSE:SR) experienced a change in its stock outlook as Mizuho shifted its rating from Buy to Neutral and adjusted the price target to $62 from $64. The utility company's shares had seen a 12.1% total return since the previous upgrade to Buy in September. However, this was slightly lower than the 14.7% return of its Local Distribution Company (LDC) peers.
Mizuho's decision to downgrade Spire's stock comes after a period of improved market sentiment towards utilities, which had initially suffered due to persistent inflation, higher interest rates, and unique incidents. Spire has since seen some operational benefits, but these have been limited by a milder winter season, which has affected the company's potential for balance sheet improvement and marketing gains.
The firm's analyst noted that while Spire's shares have performed well, the company has not kept pace with its peers. The downgrade reflects a belief that Spire is now more fairly valued, and investors may have to wait longer than anticipated for significant balance sheet repair and targeted earnings growth.
The new price target of $62 is based on lowered estimates, taking into account the recent underperformance and the tempered expectations for the company's financial progress. This adjustment serves as a recalibration of Spire's stock valuation in light of the current market conditions and company-specific factors.
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