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Investing.com -- Bank of America downgraded Spire Inc to Underperform from Neutral, saying the US gas utility’s $2.48 billion acquisition of Piedmont Natural Gas offers little near-term earnings upside and adds execution and financing risks.
The brokerage said the purchase price implies a high earnings multiple, and with limited cost synergies and uncertainty around how the deal will be funded, it expects little accretion before 2026.
Spire already faces below-average earnings growth and tighter financing conditions, BofA added.
Spire shares have slipped since the July 29 announcement, and BofA said the transaction adds pressure to an already stretched balance sheet.
The company is expected to issue or refinance about $500 million in debt through 2027, leaving earnings more vulnerable to interest-rate moves.
Spire’s marketing and midstream businesses also contribute to earnings volatility and carry little valuation upside.
The brokerage cut its price objective to $76 from $81 per share, reflecting lower expected returns and applying a discount for acquisition risk and regulatory overhang in Missouri.
BofA now sees limited total shareholder return with little earnings uplift until Missouri’s more favorable future test-year rules take effect in 2026.
The firm noted that integrations between local gas utilities rarely deliver strong cost savings unless regulators allow the benefits to be kept by shareholders.
In this case, Spire has signaled it will prioritize service reliability and retain employees, reducing the likelihood of early cost cuts.