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CHESAPEAKE UTILITIES CORP (CPK)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong top-line and operating performance: Operating revenues rose 22% YoY to $298.7M and operating income increased 9% to $86.8M, with adjusted EPS at $2.22 (GAAP EPS $2.21) .
  • Versus Wall Street consensus, revenue was a significant beat while EPS was a slight miss: actual revenue $298.7M vs $248.4M consensus*, actual EPS $2.22 vs $2.246 consensus*; management reaffirmed FY25 adjusted EPS guidance of $6.15–$6.35 .
  • Key positive drivers: colder weather-driven consumption, regulatory initiatives, infrastructure programs, natural gas growth, and demand for Marlin virtual pipeline services; O&M and depreciation rose with growth and the absence of RSAM benefits .
  • Strategic updates: dividend raised 7% to $2.74 annualized; back-half weighted 2025 earnings cadence expected given rate case timing and in-service dates for major projects .
  • WRU LNG project costs rose ~$20M and in-service shifted to Q2 2026; management plans recovery filings and expects to manage the ~$3M 2025 margin deferral operationally .

What Went Well and What Went Wrong

What Went Well

  • Adjusted gross margin up $17.9M (+10.9% YoY) to $182.4M; operating income up $7.2M (+9.0% YoY), driven by weather, regulatory initiatives, infrastructure, natural gas growth, and transmission expansions .
  • Unregulated segment strength: adjusted gross margin +18.5% YoY to $54.5M and operating income +22.9% YoY, with Marlin virtual pipeline contributing +$3.6M of margin and propane consumption +$4.2M .
  • Management reaffirmed FY25 and FY28 EPS and CapEx guidance, highlighting progress on three growth pillars and ~$113M invested in Q1; “in line with our expectations” and “reach new heights in 2025” .

What Went Wrong

  • Elevated O&M and depreciation: depreciation, amortization and property taxes +$5.2M YoY; other operating expenses +$6.1M YoY; absence of RSAM adjustment at FCG magnified D&A headwinds .
  • WRU LNG project bids came in higher with labor constraints and tariff uncertainty; total capex now ~$100M and margin shifts from Q4 2025 to 2026 .
  • Financing headwinds: interest charges increased and share count dilution reduced adjusted EPS; management cited roughly $0.11 per-share drag from financing activity .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Operating Revenues ($USD Millions)$160.1 $215.0 $298.7
Operating Income ($USD Millions)$40.9 $66.9 $86.8
Adjusted Gross Margin ($USD Millions)$121.9 $154.2 $182.4
Net Income ($USD Millions)$17.5 $36.7 $50.9
Diluted EPS ($USD)$0.78 $1.60 $2.21
Adjusted Diluted EPS ($USD)$0.80 $1.63 $2.22
Actual vs Consensus (Q1 2025)Consensus*ActualOutcome
Revenue ($USD Millions)$248.4*$298.7 Beat
Diluted EPS ($USD)$2.246*$2.22 Slight miss
# of EPS Estimates6*——
# of Revenue Estimates3*——
Values retrieved from S&P Global.*

Segment performance (Q1 2025 vs Q1 2024):

SegmentAdjusted Gross Margin ($USD Millions) Q1 2024Q1 2025Operating Income ($USD Millions) Q1 2024Q1 2025
Regulated Energy$118.5 $128.1 $58.1 $60.5
Unregulated Energy$46.0 $54.5 $21.4 $26.3

Distribution utility KPIs (Q1 2025):

KPIDelmarva NG DistributionFlorida Natural Gas DistributionFPU Electric Distribution
Operating Revenues ($USD Millions)$67.6 $94.9 $23.2
Total Volumes (Dts for NG / MWh for Elec)7,146,180 Dts 15,852,763 Dts 165,287 MWh
Average Customers113,150 227,050 33,423

Drivers of Q1 margin growth:

  • Regulated: margin from infrastructure programs (+$3.4M), natural gas growth (+$2.2M), transmission service expansions (+$2.2M), interim rates (+$1.5M) .
  • Unregulated: Marlin virtual pipeline (+$3.6M), propane consumption (+$4.2M), Aspire Energy consumption (+$0.6M) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$6.15–$6.35 $6.15–$6.35 Maintained
Adjusted EPSFY 2028$7.75–$8.00 $7.75–$8.00 Maintained
CapExFY 2025$325M–$375M $325M–$375M Maintained
CapEx2024–2028$1.5B–$1.8B $1.5B–$1.8B Maintained
Dividend (annualized)FY 2025$2.56 $2.74 Raised 7%

Additional regulatory cadence and impacts:

  • Maryland NG rate case final order: +$3.5M cumulative annual increase effective April 19, 2025 .
  • Delaware NG: settlement agreement in principle; $6.1M cumulative interim rates effective March/May 2025; final order expected Q2 2025 .
  • Florida Electric: settlement for ~$8.6M annual revenue increase pending June 2025 PSC agenda .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Technology/ERP & 1CXImplemented enterprise-wide billing; “one company” focus . Integration progress with FCG; RSAM mechanics discussed .Completed 1CX rollout at FCG; launching multi-year ERP; tech roadmap and SDMS upgrades .Expanding transformation and systems integration
Supply chain/tariffsLimited explicit mentions in Q3/Q4 PRs .Tariff uncertainty and licensed labor constraints increased WRU costs/timing .Watchlist risk; cost pressure episodic
Regulatory/legalFiled DE NG and FL Electric rate cases; interim rates .MD final +$3.5M; DE interim +$6.1M, final expected Q2; FL Electric settlement ~$8.6M .Accelerating approvals; margin back-half weighted
Product performance (Marlin)Virtual pipeline demand up; margin contributions .+$3.6M margin from Marlin; broader CNG demand in NC/OH .Strengthening utilization and contracts
Regional/customer growth~4% Delmarva and Florida growth cited .Delmarva +4.0%, Florida +3.0% avg residential growth in Q1 .Sustained above-average growth
Depreciation/RSAMRSAM benefited Q3/Q4 2024; RSAM reserve fully utilized by 12/31/24 .No RSAM in Q1 2025; FCG depreciation study targeted for Q3/Q4 implementation, effective 1/1/25 .Transitional; relief later in year

Management Commentary

  • “Our results for the quarter are in line with our expectations... approximately 11 percent growth in adjusted gross margin and approximately 6 percent growth in adjusted EPS... incremental earnings to be more heavily weighted toward the fourth quarter of 2025.” — Jeff Householder, CEO .
  • “Adjusted gross margin of approximately $182 million, up 11%... our unregulated business generated an additional $0.12 of adjusted EPS... Marlin virtual pipeline deliveries drove $3.6 million of additional gross margin.” — Beth Cooper, CFO .
  • “Fitch Ratings issued our inaugural investment-grade credit rating... BBB+... and a stable outlook... equity to total capitalization ratio of 49%... ahead of our equity issuance plan.” — Beth Cooper, CFO .
  • “WRU... bids were significantly higher... availability constraints for certain skilled and licensed labor and... uncertainty around the current economic climate... $20 million increase in capital... in-service shifted to Q2 2026.” — Jeff Householder, CEO .

Q&A Highlights

  • Space industry infrastructure: interest and potential LNG applications near Cape Canaveral; exploring Wallops Island with a $6.5M Virginia grant; potential future participation within FCG territory .
  • Marlin expansion: continued capitalization and equipment positioning, notably Ohio; no large discrete expansion announcements, business-as-usual longer-term contracts .
  • Tariffs/supply chain: generally limited impact to date, but WRU experienced cost increases; licensed electrician availability in MD and data-center demand cited as labor, not broad tariff, constraints .
  • WRU margin deferral: ~$3M margin shift out of 2025; management expects operating and expense offsets; anticipates FERC cost recovery adjustment filing .
  • Guidance achievability: reaffirmed FY25 range despite WRU; capital cadence and return to target capital structure will influence placement within range .
  • Seasonality: earnings cadence shifted in 2025; expected to normalize beyond 2026 pending timing of future projects and regulatory actions .

Estimates Context

Metric (Q1 2025)Consensus*ActualDelta
Diluted EPS ($USD)2.246*2.22 -0.026 (miss)
Revenue ($USD Millions)248.4*298.7 +50.3 (beat)
Primary EPS – # Estimates6*——
Revenue – # Estimates3*——
Values retrieved from S&P Global.*

Implications:

  • Revenue beat reflects colder weather (HDD above normal in Delmarva/Ohio) and strong Marlin/propane demand; EPS miss tied to higher D&A, O&M, interest, and share dilution, partially offsetting margin strength .

Key Takeaways for Investors

  • Back-half weighted year: interim/final rate increases and in-service dates of major transmission projects will shift incremental margin to Q3/Q4; monitor Delaware/Florida approvals and project commissioning timelines .
  • WRU delay manageable: ~$3M 2025 margin deferral and ~$100M total cost; management expects cost recovery filings and operational mitigation; watch FERC adjustment .
  • Dividend growth reinforces capital plan: annualized dividend up 7% to $2.74, aligning with multi-year EPS trajectory and balanced equity/debt financing .
  • Strong unregulated momentum: Marlin virtual pipeline and propane consumption driving double-digit margin growth; sustained customer demand and avoidance of spot propane purchases supported margins .
  • Regulatory tailwinds: MD final order (+$3.5M), DE interim (+$6.1M) and FL Electric settlement (~$8.6M) underpin 2025 margin; EPS guidance reaffirmed at $6.15–$6.35 .
  • Weather and customer growth catalysts: colder Q1 HDDs and residential growth (Delmarva +4.0%, Florida +3.0%) added margin; continued in-migration supports LDC organic growth .
  • Capital structure and liquidity: equity-to-cap ratio ~49% with ample revolver/private placement capacity; inaugural Fitch BBB+ rating supports funding needs .