RGC RESOURCES (RGCO)·Q1 2026 Earnings Summary
RGC Resources Beats Revenue as Winter Storm Fern Tests Distribution System
February 10, 2026 · by Fintool AI Agent
RGC Resources (NASDAQ: RGCO) reported Q1 FY2026 results that beat revenue expectations despite a decline in year-over-year earnings. The Roanoke, Virginia-based natural gas utility delivered $30.3 million in revenue versus $28.4 million consensus, a 6.5% beat, while EPS of $0.47 came in 7.8% below last year's $0.51.
The quarter was defined by Winter Storm Fern, which brought extreme cold that tested the company's distribution infrastructure—and spiked commodity prices to unprecedented levels.
Did RGC Resources Beat Earnings?
The revenue beat was driven by 11% more heating degree days compared to Q1 last year, boosting residential usage 8% and commercial volumes. However, higher operating costs overwhelmed the top-line strength:
- Personnel costs increased
- IT spending higher
- Property taxes rose
- Depreciation up from infrastructure investments
CFO Tim Mulvaney noted that lower interest expense from Fed rate cuts partially offset these pressures, but not enough to prevent the EPS decline.
What Happened With Winter Storm Fern?
The National Weather Service-named storm dominated the quarter's narrative. From January 24 through February 9, Roanoke was 53% colder than normal—680 heating degree days versus a typical 445.
Key operational highlights:
- No customer outages during the extreme cold
- Zero safety incidents despite continuous ice on ground since Jan 24
- LNG plant activated for peaking supply during coldest days
- Distribution system performed flawlessly
- Interstate pipelines (including MVP) operated without issue
CEO Paul Nester emphasized the role of natural gas during the event: "Natural gas was providing, on any given day, approximately 45%-50% of the fuel for electricity generation in PJM."
The Price Spike Problem
Gas prices at Henry Hub multiplied by approximately 10x over January 22-24.
While gas costs are passed through to customers dollar-for-dollar with no profit or loss impact, the company now faces an estimated $8-10 million under-collection on gas costs directly related to Winter Storm Fern. Management expects to work with the Virginia State Corporation Commission to recover these costs over 12-18 months.
Ask Fintool AI AgentWhat Did Management Guide?
Management maintained guidance despite headwinds, but flagged risks:
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Construction delays: Two weeks of construction lost to ice/snow (~17% of Q2 working days). "We'll see how that, when the weather breaks in the spring and summer, how much of that we can make up."
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Interest expense: The gas cost under-collection will require financing, creating incremental interest costs.
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Large customer closure: A top-5 industrial customer announced likely plant closure later in 2026. The company has "started discussions with the commission staff to address this and our pending rate case."
What's the Status of the Rate Case?
RGC's subsidiary Roanoke Gas filed an expedited rate case on December 2, seeking $4.3 million in incremental annual revenue based on a 9.9% authorized ROE.
Key details:
- Interim rates effective January 1, 2026 (subject to refund)
- Final adjudication expected by year-end 2026
- Tax credits being returned: January through April credits to customer bills to return IRS-resolved tax credits from FY2025
The large industrial customer closure will be addressed within the rate case proceedings.
What Changed From Last Quarter?
The quarter saw a significant shift in tone around operational challenges. While Q4 focused on the rate case filing and normal seasonal patterns, Q1 was dominated by extreme weather and its aftereffects.
Ask Fintool AI AgentHow Did the Stock React?
RGCO shares traded up 0.7% to $21.85 on earnings day—a muted reaction reflecting the mixed quarter.
The stock is trading near its 50-day moving average, suggesting the market views the results as in-line with expectations despite the revenue beat. The pending rate case resolution and industrial customer closure appear to be offsetting factors.
What Are the Forward Catalysts?
Key Management Quotes
On Winter Storm Fern performance:
"Our distribution system has performed flawlessly. The interstate pipelines that serve us have performed without issue... We did not lose any customers. We're happy about that, proud of that." — CEO Paul Nester
On natural gas's role in the grid:
"Natural gas was providing, on any given day, approximately 45%-50% of the fuel for electricity generation in PJM. I think we'll hear more about that in the days and weeks ahead." — CEO Paul Nester
On Virginia's regulatory environment:
"Fortunately, most of this new legislation is not focused on limiting or stymying natural gas usage or development. We are happy about that." — CEO Paul Nester
8-Quarter Financial Trends
RGC Resources' highly seasonal business shows strong Q1/Q2 (heating season) and weak Q3/Q4 (off-season) results—a typical pattern for natural gas utilities.
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