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CHESAPEAKE UTILITIES CORP (CPK)·Q4 2024 Earnings Summary

Executive Summary

  • Chesapeake Utilities delivered solid Q4: adjusted EPS of $1.63 was essentially in line with consensus shown in-company materials (FactSet $1.64) and GAAP diluted EPS was $1.60; operating income rose 41% YoY on higher adjusted gross margin and lower one-time FCG costs .
  • Full-year 2024 met guidance, and management reaffirmed 2025 EPS guidance of $6.15–$6.35 and 2028 of $7.75–$8.00; 2024 capex came in at $355.8M near the high end, and 2025 capex is guided to $325–$375M .
  • Growth drivers remain intact: FCG contributed ~$88.6M of FY adjusted gross margin; regulated EBITDA-like margin expansion benefited from infrastructure programs (GUARD/SAFE/SPP), transmission expansions and organic customer growth .
  • Catalysts/risks: active rate cases (DE gas, FL electric) and FERC-approved LNG storage project (WRU) support 2025+ margin, while RSAM has been fully utilized with a depreciation filing submitted to address reserve imbalance; Florida PSC staff recommended $9.9M increase for FL electric pending commission approval .

What Went Well and What Went Wrong

  • What Went Well
    • Strong Q4 operating performance: operating income up 41% YoY ($66.9M vs $47.3M) on 18% adjusted gross margin growth, with FCG, virtual pipeline services and infrastructure programs as key contributors .
    • Integration of FCG ahead of plan: ~$88.6M FY adjusted gross margin contribution; SAFE program expansion approved (+$50M), and nine FCG/PPC projects filed and approved since acquisition .
    • Guidance intact and balance sheet trending to target: 2025/2028 EPS guidance reaffirmed; equity-to-total cap reached 48.4% (target 50–60%) and liquidity $505M at year-end 2024 .
  • What Went Wrong
    • Dilution and higher interest weighed on EPS: management cites $1.15/share impact from interest and $0.96/share from dilution tied to the FCG financing in 2024 .
    • Weather remained warmer than normal in several territories for the year (Delmarva and Ohio ~10% warmer than normal), muting some consumption upside .
    • Opex stepped up: FCG-related operating expenses and higher facilities/insurance costs increased other operating expenses in Q4 and FY .

Financial Results

Overall P&L trend vs prior two quarters (GAAP and non-GAAP)

MetricQ2 2024Q3 2024Q4 2024
Total Operating Revenues ($M)$166.3 $160.1 $215.0
Adjusted Gross Margin ($M)$126.6 $121.9 $154.2
Operating Income ($M)$40.8 $40.9 $66.9
Net Income (GAAP, $M)$18.3 $17.5 $36.7
Diluted EPS (GAAP, $)$0.82 $0.78 $1.60
Adjusted Net Income ($M)$19.3 $18.1 $37.3
Adjusted Diluted EPS ($)$0.86 $0.80 $1.63

Q4 YoY bridge highlights

Q4 YoY Drivers (select, $M unless per-share)Impact
Contribution from acquisitions$17.1 adj. gross margin increase
Virtual pipeline demand+$2.9 adj. gross margin
Regulated infrastructure programs+$1.8 adj. gross margin
Transmission expansions+$1.5 adj. gross margin
FCG operating expenses$(9.0) other opex
Interest charges$(5.9) pre-tax impact; $(0.19) per share
Adjusted EPS$1.64 → $1.63 (down $0.01)

Segment performance (Adjusted Gross Margin)

SegmentQ2 2024Q3 2024Q4 2024
Regulated Energy ($M)$103.2 $102.3 $115.1
Unregulated Energy ($M)$23.4 $19.7 $39.1
Total ($M)$126.6 $121.9 $154.2

Select KPIs

KPIQ4 2024 / FY 2024
Customer growth (avg. res.) Delmarva~4.0% FY increase
Customer growth (avg. res.) Legacy FL~3.9% FY increase
2024 Capex$355.8M
2025 Capex guide$325–$375M
Equity/Total Capital48.4% at 12/31/24

Vs. estimates (context)

  • S&P Global consensus could not be retrieved due to a data access limit; as a proxy, company’s presentation shows Q4 Adjusted EPS consensus $1.64 vs reported $1.63 and Adjusted Net Income consensus $36.4M vs reported $37.3M, essentially inline .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2024$5.33–$5.45 affirmed in-yearAchieved midpoint ($5.39) Achieved
Adjusted EPSFY 2025$6.15–$6.35 (prior)Reaffirmed $6.15–$6.35 Maintained
Adjusted EPSFY 2028$7.75–$8.00 (prior)Reaffirmed $7.75–$8.00 Maintained
CapexFY 2024$300–$360M (prior)Actual $355.8M At high end
CapexFY 2025N/A$325–$375M New detail
5-Year Capex (2024–2028)5-year$1.5–$1.8B (prior)Reaffirmed $1.5–$1.8B Maintained
Capital structure2025 target50–60% equity-to-total cap (framework)48.4% as of 12/31/24; target reiterated On track

Earnings Call Themes & Trends

TopicQ2 2024 (prior)Q3 2024 (prior)Q4 2024 (current)Trend
Regulatory agenda (rate cases)Noted MD filing; DE/FL electric intents; SAFE mod pending MD +$2.6M approved; DE interim $2.5M; FL electric interim $1.8M DE filed 2nd interim $8.3M; FL PSC staff recommends $9.9M; MD Phase II hearing Mar-25 Progressing; constructive outcomes
RSAM/DepreciationN/AWatching FL Supreme Court; depreciation path as alternative RSAM fully utilized; FCG depreciation study filed to amortize reserve over 2 years Pivot to traditional depreciation
Capital deploymentFY24 capex $300–$360M guide YTD $257M; identified ~$1.3B; most pre-approved FY24 $355.8M; 2025 guide $325–$375M; 5-yr $1.5–$1.8B reaff’d Sustained high investment
LNG storage (WRU)Expecting FERC by YE24 Anticipated FERC approval by YE; on schedule FERC approved Jan-25; in service Q3’25 De-risked timeline
Miami Inner LoopFiled Sep-24 Expected approval, 2025 contribution Approved Feb-25; supports FCG growth Incremental 2025 margin
Marlin virtual pipeline/RNGGrowth and RNG opportunities Strategy advancing; FCD Q-RIN status, RNG volumes +$4.5M FY adj. gross margin; Q4 contribution Expanding demand
Business transformation (SAP/ERP)SAP go-live planned Q3 SAP implemented; FCG transition next; ERP under assessment OneCX billing live; ERP and AI/cyber initiatives underway Scaling for growth
Policy/executive ordersN/APreparing for new administration focus on energy/tax EOs seen as favorable for energy/nat gas; positive tone Constructive macro tone

Management Commentary

  • “Adjusted diluted earnings per share for the fourth quarter was $1.63, bringing our full year 2024 EPS to $5.39 at the midpoint of our guidance range… We invested $356 million of capital in 2024” — CEO Jeff Householder .
  • “Florida City Gas generated a gross margin contribution of $2.88 per share… increased interest expense of $1.15 per share and $0.96 per share of dilution” — CFO Beth Cooper (FY 2024 EPS bridge) .
  • “Florida PSC staff [recommended] a $9.9 million increase in rates [for FL electric], which is subject to PSC commission review and approval” — EVP James Moriarty .
  • “We received FERC approval for our $80 million [Worcester] LNG storage project… expect in-service in Q3 2025” — EVP James Moriarty .
  • “We are preparing to transition our FCG operations to the new SAP customer billing system… assessing an ERP implementation… investments in AI and cybersecurity” — CEO Jeff Householder .

Q&A Highlights

  • Policy/tariffs/executive orders: Management views the recent executive orders as broadly favorable to energy and natural gas, with potential to accelerate project timelines; strategy unchanged (capital deployment, proactive regulation, transformation) .
  • RSAM/depreciation: RSAM initial tranche completed in 2024; company filed a traditional depreciation study at FCG seeking two-year amortization of reserve imbalance (addressing ~$25–$26M) .
  • FERC LNG clarification timing: Company filed quickly; no rehearings or protests; proceeding to next phase .
  • Weather/propane: Late-December cold aided propane consumption; overall quarter started mild .

Estimates Context

  • S&P Global consensus estimates could not be retrieved due to a system access cap during this session; as a directional proxy, the company’s presentation shows: Q4 2024 Adjusted EPS consensus $1.64 vs reported $1.63; Adjusted Net Income consensus $36.4M vs reported $37.3M; FY 2024 Adjusted EPS consensus $5.40 vs reported $5.39; FY 2025 Adjusted EPS consensus $6.24 vs guidance midpoint $6.25 .
  • Implications: Small EPS variance suggests minimal model changes for Q4; 2025 consensus ($6.24) aligns closely with reaffirmed guidance ($6.15–$6.35), reducing estimate risk if regulatory milestones (DE/FL) finalize as expected .

Key Takeaways for Investors

  • Execution remains consistent: 2024 delivered at guidance midpoint with Q4 operating leverage; 2025/2028 EPS targets reaffirmed, underpinned by visible, largely pre-approved capex .
  • FCG integration is a growth engine: ~$88.6M FY adjusted gross margin, SAFE acceleration, and Miami Inner Loop approval support 2025 incremental margin .
  • Regulatory path constructive: FL electric staff recommendation ($9.9M), DE interim increases, MD Phase II hearing; these should underpin margin/returns in 2025 .
  • WRU LNG storage de-risked: FERC approval secured; Q3’25 in-service timeline supports winter reliability and growth in Delmarva .
  • Capital and balance sheet: FY24 capex at high end; 2025 guide $325–$375M; equity-to-cap trending to 50% target, liquidity robust ($505M) .
  • Watch items: Rate case outcomes (timing/size), progress on depreciation study relief at FCG (RSAM transition), and macro-driven interest expense/dilution effects on EPS bridge .
  • Trading setup: With estimates essentially inline and guidance reaffirmed, stock catalysts skew to regulatory approvals and Investor Day updates on identified capex and 2025+ margin realization .

Appendix: Additional Detail

Selected FY 2024 highlights

MetricFY 2024FY 2023
Adjusted Gross Margin ($M)$567.4 $454.1
Operating Income ($M)$228.2 $150.8
Net Income (GAAP, $M)$118.6 $87.2
Adjusted Net Income ($M)$121.5 $97.8
Diluted EPS (GAAP, $)$5.26 $4.73
Adjusted Diluted EPS ($)$5.39 $5.31

Drivers of regulated growth (FY)

DriverEPS contribution FY’24
Acquisitions (FCG adj. gross margin less FCG opex)$2.88/share
Regulated infrastructure programs$0.20/share
Transmission growth$0.17/share
Distribution growth$0.19/share

Notes on weather and consumption

  • Delmarva and Ohio service territories were ~10% warmer than normal in 2024; net FY adjusted gross margin uplift from consumption was modest ($0.3M) .