Name: CHESAPEAKE UTILITIES CORP Q2 2025 Earnings Call
Start: 2025-08-08T12:30:00.000Z

Executive Summary

Q2 2025 delivered double‑digit growth: Adjusted EPS $1.04 (+21% YoY), operating income $50.3M (+23%) on adjusted gross margin $142.8M (+13%), driven by rate cases, transmission expansions, and CNG/RNG/LNG services .
EPS and revenue modestly beat consensus: EPS $1.04 vs $1.02*, revenue $192.8M vs $182.5M*; FY25 EPS guidance reaffirmed at $6.15–$6.35 (assumes successful FCG depreciation outcome) . Values retrieved from S&P Global.*
2025 capital guidance raised by $50M to $375–$425M on accelerated project spend; equity capitalization target reached at ~50% and new $200M long-term notes at ~5.04% coupon executed post‑quarter .
Regulatory milestones and WRU update: final orders across DE/MD/FL; FERC approved WRU rate update adding $3.9M full-year margin when in service (now expected Q2 2026) .

What Went Well and What Went Wrong

What Went Well
- “Adjusted Gross Margin increased by 13 percent… Adjusted EPS up 21 percent relative to the second quarter of 2024,” reflecting execution across regulated and unregulated businesses (CEO) .
- Regulatory momentum: final orders in all three active rate cases; equity capitalization reached ~50%; debt capacity expanded (CFO/management remarks) .
- Transmission and CNG/RNG/LNG strength: +$3.9M rate uplift approved for WRU; Q2 unregulated margin growth led by Marlin and RNG despite propane headwinds .
What Went Wrong
- Seasonal and mix pressures: Unregulated segment posted an operating loss ($1.5M) on higher depreciation/property taxes and softer propane margins/consumption .
- Cost inflation and supply chain/labor constraints increased WRU capital and delayed in‑service to Q2 2026 (management cited tariffs and licensed labor scarcity in MD) .
- Absence of prior RSAM benefits increased depreciation and dampened EPS vs last year’s mechanisms; Q2 D&A/property taxes +$4.5M YoY .

Metric	Q2 2024	Q1 2025	Q2 2025
Total Operating Revenues ($M)	$166.3	$298.7	$192.8
Adjusted Gross Margin ($M)	$126.6	$182.4	$142.8
Operating Income ($M)	$40.8	$86.8	$50.3
Diluted EPS (GAAP) ($)	$0.82	$2.21	$1.02
Adjusted Diluted EPS ($)	$0.86	$2.22	$1.04

Segment breakdown (Q2 2025 vs Q2 2024):

Segment	Adjusted Gross Margin ($M) Q2 2024	Adjusted Gross Margin ($M) Q2 2025	Operating Income ($M) Q2 2024	Operating Income ($M) Q2 2025
Regulated Energy	$103.3	$117.7	$40.5	$51.8
Unregulated Energy	$23.4	$25.0	$0.4	$(1.5)

KPIs and drivers:

KPI/Driver	Q2 2024	Q2 2025
Equity/Total Capitalization (%)	—	~50%
YTD Capex ($M)	—	$212.8
CNG/RNG/LNG incremental margin ($M)	$3.5	$3.5
Customer growth contributions to Adjusted GM ($M) – Delmarva/Florida	$0.4/$1.4 (Q2 2025 detail)	$0.4/$1.4

Versus estimates:

Metric	Q2 2024	Q1 2025	Q2 2025
EPS Consensus Mean ($)	$0.81*	$2.25*	$1.02*
EPS Actual ($)	$0.86	$2.22	$1.04
Revenue Consensus Mean ($M)	$194.7*	$248.4*	$182.45*
Revenue Actual ($M)	$166.3	$298.7	$192.8

Values retrieved from S&P Global.*

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EPS	FY 2025	$6.15–$6.35 (reaffirmed Q1)	$6.15–$6.35 (assumes successful FCG depreciation study)	Maintained
Adjusted EPS	FY 2028	$7.75–$8.00 (reaffirmed Q1)	$7.75–$8.00 (reaffirmed)	Maintained
Capital Expenditures	FY 2025	$325–$375M (Q1)	$375–$425M (raised in Q2)	Raised
WRU Margin Addition	Post in‑service	N/A	+$3.9M full-year margin when in service	New detail
Dividend	Quarterly	Prior annualized $2.56 (Q1 declaration)	$0.685/share for Oct 6, 2025 payment	Increased (7% YoY)

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Technology/ERP	Completed 1CX SAP rollout across FCG; initiating multi‑year ERP	New CIO appointed; ERP next steps; SAP foundation extended	Strengthening
Supply Chain/Tariffs	WRU costs rising; timing shifted; macro uncertainties noted	Tariffs/labor scarcity impacting WRU bids and schedule (CEO)	Headwind manageable
Regulatory	DE/MD/FL cases nearing resolution; interim rates began Q2	Final orders received; FCG depreciation study progressing to Sept hearing	Positive resolution
Product/Service (CNG/RNG/LNG)	Strong Marlin virtual pipeline demand; RNG projects online	+$3.5M Q2 margin from Marlin and Full Circle Dairy; continued demand	Growing
Regional Trends	Delmarva/Florida residential growth ~4%/3% in Q1	Q2 customers +4.4% Delmarva, +2.9% Florida; new developments served	Above‑average growth
Data Centers/Energy Demand	Early exploration; AEP fuel‑cell pipeline agreement (Ohio)	Duncan Plains pipeline announced; broader hyperscaler interest monitored	Emerging opportunity

CEO: “Adjusted Gross Margin increased by 13 percent… Adjusted EPS up 21 percent… reinforces our ability to operate our regulated and unregulated businesses safely and efficiently to meet the rising demand for natural gas” .
CFO: “We reached our equity capitalization target of 50%… committed $200M new long‑term debt… maintain disciplined financing to uphold investment grade metrics” .
General Counsel: “Final orders on all three rate cases… staff supportive on FCG depreciation; hearing expected in September with a final order in Q4” .

Data centers: Management disclosed the Ohio Duncan Plains project for an AEP fuel‑cell data center; pursuing similar opportunities across regions under NDAs but no additional disclosures yet .
PJM auction/electric prices: Potentially increasing interest in direct natural gas service among large C&I customers; discussions active in Florida and Mid‑Atlantic .
FCG depreciation study: Staff recommendation expected in September; company confident in successful outcome; motions to dismiss/reconsideration opposed by staff .
Seasonality cadence: 2025 earnings back‑half weighted due to project timing and depreciation study outcomes; normalization expected beyond 2026 subject to project timing .

Q2 2025: EPS $1.04 vs $1.02* consensus (+$0.02), revenue $192.8M vs $182.5M* (+$10.3M). Drivers: rate increases (+$0.13 EPS), transmission expansions (+$0.12), infrastructure programs (+$0.11), CNG/RNG/LNG (+$0.11), offset by higher D&A/property taxes (−$0.14) and facilities/O&M (−$0.14) . Values retrieved from S&P Global.*
Q1 2025 (context): EPS $2.22 vs $2.25* (slight miss), revenue $298.7M vs $248.4M* (beat), with colder weather and virtual pipeline demand cited as key positives . Values retrieved from S&P Global.*

Rate case tailwinds and infrastructure programs are now embedded, supporting mid‑teens adjusted EPS growth and reaffirmed FY25 EPS guidance despite WRU delay .
Raised 2025 capex to $375–$425M accelerates margin contributions in 2026+, while balance sheet strength (50% equity, A‑ rated notes) reduces financing risk .
Unregulated propane faces seasonal and commodity headwinds; offset from Marlin virtual pipeline and RNG continues to diversify margin sources .
WRU delay shifts margin to 2026 but FERC rate approval (+$3.9M full‑year) improves long‑term economics; monitor construction progress and regulatory milestones .
Watch FCG depreciation study (Q4 decision expected): guidance assumes success; adverse outcome would modestly pressure EPS vs range midpoint .
Data center gas infrastructure opportunity emerging (Ohio project announced); potential growth optionality across Mid‑Atlantic/Florida systems .
Dividend remains a steady compounding component ($0.685 quarterly; 7% annual increase), supported by top‑quartile TSR track record and disciplined payout strategy .