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CHESAPEAKE UTILITIES CORP (CPK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered double-digit adjusted gross margin and operating income growth (Adj. GM +12.5% to $137.2M; OI +10.0% to $45.0M), while diluted EPS was $0.82; management reaffirmed FY25 adjusted EPS $6.15–$6.35 contingent on a favorable FCG depreciation ruling and raised FY25 capex to $425–$450M .
  • Versus consensus, EPS missed ($0.82 vs $0.94*) while revenue materially beat ($179.6M vs $132.2M*); miss driven by higher D&A, absence of 2024 RSAM benefit, and higher O&M; revenue strength came from transmission expansions, regulatory programs, and CNG/RNG/LNG services .
  • Capital deployment accelerated ($123M in Q3; $335.6M YTD), supported by $200M of new private placement notes and continued equity issuance ($92.0M LTM), maintaining an equity capitalization near the 50% target .
  • Stock narrative catalysts: December hearing on FCG depreciation study (seeking two-year amortization of ~$19M excess reserve) and clear capex visibility with >70% of five-year spend already supported by approvals; WRU LNG storage and Florida pipeline projects underpin 2026 margin expansion .

What Went Well and What Went Wrong

  • What Went Well

    • Regulated margin growth: Adjusted gross margin rose 12.2% YoY to $114.7M; operating income up 11.1% to $48.9M, driven by natural gas transmission expansions, infrastructure programs, rate changes, and distribution growth .
    • Unregulated expansion: Adj. GM up 13.1% to $22.4M, led by Marlin virtual pipeline services (+$3.1M) and Aspire Energy performance; management emphasized “meeting rapid growth in demand for virtual pipeline transportation” .
    • Strategic continuity: Reaffirmed FY25 EPS guidance and FY28 EPS $7.75–$8.00; raised FY25 capex to $425–$450M with ERP kickoff and ESNG system improvements; customer growth remains robust (Delmarva +4.3%, FPU +3.5%, FCG +2.2%) .

  • What Went Wrong

    • EPS vs Street: Q3 diluted EPS $0.82 missed consensus $0.94*, pressured by higher D&A/property taxes (–$0.24 EPS), absence of prior-year RSAM benefit (–$0.10), and increased facilities/maintenance/O&M (–$0.36) .
    • Seasonal softness: Unregulated segment posted a $3.9M operating loss due to seasonal demand patterns despite higher margins; Florida Electric saw lower consumption given 15% fewer CDDs YoY .
    • Regulatory uncertainty: FY25 EPS guidance remains contingent on the FCG depreciation study outcome; OPC testimony opposed changes, elevating timing risk into Dec–Feb window for retroactivity .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Operating Revenues ($USD Millions)$160.2 $298.7 $192.8 $179.6
Adjusted Gross Margin ($USD Millions)$122.0 $182.4 $142.8 $137.2
Operating Income ($USD Millions)$40.9 $86.8 $50.3 $45.0
Diluted EPS (GAAP) ($USD)$0.78 $2.21 $1.02 $0.82
Adjusted Diluted EPS ($USD)$0.80 $2.22 $1.04 $0.82
Segment MetricQ3 2024Q3 2025
Adjusted Gross Margin – Regulated ($USD Millions)$102.2 $114.7
Adjusted Gross Margin – Unregulated ($USD Millions)$19.8 $22.4
Operating Income – Regulated ($USD Millions)$44.0 $48.9
Operating Income (Loss) – Unregulated ($USD Millions)$(3.1) $(3.9)
KPIsQ2 2025Q3 2025
Residential Customer Growth – Delmarva (%)4.4% 4.3%
Residential Customer Growth – FPU (%)2.9% 3.5%
Residential Customer Growth – FCG (%)—2.2%
Capex (Quarter) ($USD Millions)—$123
Capex (YTD) ($USD Millions)$212.8 $335.6
Long-term Debt Issuance in Q3 ($USD Millions)—$200
Equity Issuance LTM ($USD Millions)—$92.0
Equity Capitalization (%)50% 49%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$6.15–$6.35 $6.15–$6.35 (contingent on FCG depreciation) Maintained
Capital ExpendituresFY 2025$375–$425M $425–$450M Raised
Adjusted EPSFY 2028$7.75–$8.00 $7.75–$8.00 Maintained
Capital Expenditures2024–2028$1.5–$1.8B $1.5–$1.8B Maintained
DividendQuarterly—$0.685 per share (declared Nov 6, 2025) Updated declaration

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
FCG Depreciation StudyImportance to FY25 cadence; rate cases advanced Hearing shifted; continued progress Hearing Dec 11; OPC opposition; seeking two-year amortization of $19M; retroactive inclusion possible if order by early Feb Near-term regulatory catalyst; timing risk but path to resolution
ERP / Business TransformationTech roadmap preparations (1CX at FCG) Transformation enabling growth ERP kickoff; ~$15M spend in 2025 to modernize operations with SAP, GIS, AI-enabled tools Scaling execution; incremental capex
Customer/Demand GrowthStrong residential growth in Delmarva/Florida Continued growth; RNG/CNG/LNG services Delmarva +4.3%, FPU +3.5%, FCG +2.2%; Ohio data center pipeline opportunity Broad-based demand; emerging data center adjacencies
WRU LNG Storage (MD)FERC approval; construction targeted to 2Q26 Advanced to notice to proceed; margin step-up in 2026 Tanks onsite; PHMSA inspection completed; margin $10.2M in 2026, $17.6M thereafter On track; substantial 2026 contribution
Financing & LiquidityEquity cap near 50%; disciplined balance sheet $200M private notes announced $200M funded at blended 5.04%; 87% liquidity on $755M capacity; continued equity via DRIP/ATM Balanced funding supports capex ramp
Rate CasesMD/DE/FL electric progressing MD, DE (Phase I), FL settlements approved; interim rates Finalized DE Phase II; total margin uplift $13.1M (2025) and $18.2M (2026) Constructive outcomes; visibility improving

Management Commentary

  • “We reported adjusted earnings per share of $0.82 for the third quarter of 2025 and $4.06 year to date, an 8% increase over the same period last year… we are reaffirming our full-year 2025 EPS guidance of $6.15–$6.35 per share” (Jeff Householder) .
  • “We continue to invest capital at a run rate of over $1 million a day, with $336 million already invested in the first nine months… increasing our 2025 capex guidance to $425–$450 million” (Jeff Householder) .
  • “Under the new schedule, the company submitted testimony… the excess reserve is now $19 million… hearing is scheduled for December 11th… process expected to conclude no later than February 2026” (Jim Moriarty) .
  • “Adjusted gross margin was approximately $137 million, up 12%, and adjusted net income was approximately $20 million, up 8%… operational expenses at only 34% of adjusted gross margin vs 37% last year” (Beth Cooper) .
  • “Adjusted EPS benefited from transmission projects, infrastructure programs, and permanent rate increases; offset by increased D&A/property taxes and absence of RSAM benefit” (Beth Cooper) .

Q&A Highlights

  • FCG Depreciation Outcome & Timing: Management confirmed FY25 guidance presumes successful outcome; retroactive inclusion possible with an order in early Feb due to subsequent events accounting; two-year amortization of ~$19M excess reserve targeted .
  • Settlement Prospects: Team is working toward potential unanimous settlement but cannot predict parties’ willingness; historical approach favors resolution if possible .
  • Project Throughput: ~400 distribution/transmission projects placed in service YTD across varied scales, aided by team consolidation, tooling, and supply chain improvements; reflects inclusion of FCG system construction .
  • Ohio Data Center Opportunity: A pipeline agreement with AEP to serve a fuel-cell facility for a data center; additional opportunities being evaluated amid favorable regulatory and gas supply backdrop; Ohio operations predominantly unregulated .
  • Growth Mix & Geography: Delmarva’s residential growth trending ahead of Florida; management expects continued strength given expansion into surrounding communities and strong Florida growth in legacy territories and FCG .

Estimates Context

MetricQ3 2025 ActualQ3 2025 Consensus*Surprise*
Revenue ($USD Millions)$179.6 $132.2*+$47.4*
Diluted EPS ($USD)$0.82 $0.94*–$0.12*
Forward Consensus*Q4 2025
Revenue ($USD Millions)$240.2*
Diluted EPS ($USD)$2.08*
  • Street likely revisits FY25 EPS trajectory pending the December FCG depreciation hearing; management reiterated that achieving guidance depends on outcome/timing and amortization period approval .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix of beat/miss: Strong revenue/adj. margin growth, but EPS missed Street due to D&A, RSAM lap, and O&M; operational efficiency improved Opex/Adj. GM to 34% from 37% .
  • Regulatory catalysts: Dec 11 FCG depreciation hearing (retroactivity window through early Feb) is pivotal for landing FY25 EPS range; DE Phase II rate design finalized, with total rate-case margin uplift $13.1M (2025) and $18.2M (2026) .
  • Visibility to 2026 step-up: WRU LNG project and Miami Inner Loop/Florida expansions expected to materially increase adjusted gross margin in 2026 (WRU: $10.2M in 2026; pipeline expansions total $46.1M 2026 estimates) .
  • Capex ramp supported: $425–$450M FY25 capex with ERP spend and ESNG improvements; funding balanced via $200M private notes and $92M LTM equity to maintain ~50% equity capitalization .
  • Demand tailwinds: Residential growth in all service areas; continued strength in CNG/RNG/LNG and nascent data center-driven transmission opportunities in Ohio .
  • Trading lens: Near-term stock moves likely sensitive to FCG hearing headlines and clarity on amortization/timing; medium-term thesis supported by approved rate cases and pipeline/infrastructure projects delivering margin growth .
  • Dividend continuity: Board declared $0.685 quarterly dividend; long-term policy targets 45–50% payout with consistent increases (annualized $2.74 in 2025) .

Appendix: Additional Context

  • Seasonal considerations: Q3 is typically the smallest contributor to full-year earnings; unregulated segment losses can occur despite margin gains due to ratable expense recognition .
  • Weather: Fewer CDDs in Florida reduced electric consumption; HDDs increased YTD in Delmarva/Ohio, lifting consumption earlier in the year .
  • Non-GAAP definitions and reconciliations provided in press materials; adjusted measures exclude FCG transaction/transition-related costs .