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Chesapeake Utilities reported a strong Q1, with adjusted net income up 16% and adjusted EPS up 11% year over year, helped by natural gas demand, infrastructure investments, updated rates and colder weather.
The company’s WRU LNG storage project in Maryland was delayed by regulatory timing, severe winter weather and design changes, cutting 2026 EPS by about $0.10, though it is still expected to start up early next year.
Chesapeake filed a Florida City Gas rate case seeking a $47 million base rate increase, and also boosted its annualized dividend by 7.3% to $2.94 per share while reaffirming its long-term EPS growth targets.
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Chesapeake Utilities (NYSE:CPK) reported a higher first-quarter profit and margin, citing natural gas demand, infrastructure investments, updated rates and colder winter weather across parts of its service territory.
Jeffry M. Householder, chair, president and chief executive officer, said the company had a “strong start to the year,” with adjusted net income rising 16% and adjusted earnings per share increasing 11% from the first quarter of 2025. Adjusted gross margin was approximately $206 million, up 13%, while adjusted net income was approximately $59 million. Adjusted EPS was $2.47.
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Householder said Chesapeake generated an incremental $12 million of margin from transmission and infrastructure projects and $11 million from distribution system growth, updated rates and higher customer usage tied to colder winter weather.
Householder said the company continued to see solid commercial customer growth and above-average residential customer growth. Residential customer growth was 3.3% in Delmarva, 2.2% for Florida Public Utilities and 2% for Florida City Gas.
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“Increasing demand for natural gas and propane remains core to our long-term growth strategy,” Householder said, adding that population growth, homebuilding and customer needs continue to support investment opportunities across Chesapeake’s delivery systems.
The company invested $122 million of capital through the end of the first quarter, in line with its full-year 2026 capital expenditure guidance of $450 million to $500 million. Householder said major capital projects are expected to contribute about $31 million of gross margin in 2026 and an additional $20 million in 2027.
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Householder provided an update on the company’s WRU liquefied natural gas storage facility in Bishopville, Maryland, saying construction had made significant progress but that the project’s schedule had been affected by earlier regulatory timing, severe winter weather and design modifications intended to simplify future expansion.
He said snow, ice and freezing temperatures in January and February “significantly limited the pace of construction,” with the site inaccessible for several days because of roadway travel restrictions. While the cold weather benefited customer usage and margins in existing businesses, Householder said it was “not helpful” to the WRU construction timeline.
The schedule changes mean Chesapeake expects “significantly reduced” margin contributions from WRU in 2026. Householder said the impact will be partially offset by weather-related margin benefits and incremental Eastern Shore Natural Gas peaking capacity, but full-year EPS will be reduced by approximately $0.10. The project remains expected to come online early next year and generate $17 million of 2027 margin.
Householder also said the extreme winter temperatures reinforced the need for the project and could support a potential expansion of LNG facilities at the site in the future.
James F. Moriarty, executive vice president, general counsel, corporate secretary and chief policy and risk officer, said Chesapeake filed a rate case on April 20 for Florida City Gas. The company is requesting a base rate increase of approximately $47 million and a return on equity of 11.25%.
The filing also includes a request for interim rates of $16 million, which Moriarty said the company expects to be effective in the third quarter. A full procedural schedule has not yet been set, but Chesapeake expects a hearing in the fourth quarter of 2026 or early 2027, with full rates effective shortly thereafter.
Moriarty said the request updates cost recovery for capital investment, operating expense, insurance, depreciation and property taxes. He added that Chesapeake incorporated cost savings and efficiencies into its assumptions “wherever possible” and intends to work with Florida Public Service Commission staff and the Office of Public Counsel toward a constructive outcome.
Jeffrey S. Sylvester, senior vice president and chief operating officer and incoming chief financial officer, said regulated segment adjusted gross margin was approximately $148 million, up 15% from the prior-year quarter. Regulated operating income rose 18% to approximately $71 million.
In the unregulated energy segment, adjusted gross margin increased 8% to approximately $59 million, driven primarily by higher propane consumption and strong performance in the company’s Ohio Aspire operations. Unregulated operating income grew 8% to $28 million.
Sylvester said first-quarter adjusted EPS benefited from several factors:
$0.27 from continued natural gas demand, including transmission capital projects and distribution growth;
$0.17 from infrastructure program investments;
$0.13 from permanent rates tied to three rate cases;
$0.14 from cold weather across the system; and
$0.07 from improved Aspire performance and gains from off-system natural gas sales.
Those gains were partly offset by higher payroll and benefits expense, increased operating expenses, higher credit, collections and customer service costs, depreciation and amortization, and financing activities.
At March 31, Sylvester said Chesapeake’s equity capitalization was 50%, with 107,000 shares issued during the first three months of the year. The company expects to issue $60 million of equity in 2026 through its at-the-market and waiver programs. Sylvester also said Chesapeake expects to refinance the first tranche of debt issued during the Florida City Gas acquisition, which should reduce overall interest expense.
Beth W. Cooper, executive vice president and chief financial officer, said the board approved a $0.20, or 7.3%, increase in the annualized dividend, from $2.74 per share to $2.94 per share. Cooper said this marks the company’s 66th consecutive year of dividend payments and 23rd consecutive year of dividend increases.
Cooper also said Chesapeake remains committed to a long-term earnings per share compound annual growth rate of 8% through 2028 and reaffirmed 2028 EPS guidance of $7.75 to $8.00 per share. The company expects to revisit its capital guidance range by February 2027.
The call also marked Cooper’s final earnings call before her planned retirement at the end of June after 36 years with the company, including 18 years as CFO. Householder said that during Cooper’s tenure as CFO, Chesapeake recorded earnings growth every year.
Sylvester will assume the CFO role on July 1. He said one of his priorities has been implementing the company’s “one company approach” and related operational and technology transformations.
During the question-and-answer session, Householder discussed several potential growth areas, including LNG opportunities near Cape Canaveral and Port Canaveral, data center-related gas demand in Ohio and other service areas, and possible intrastate pipeline expansion to increase natural gas capacity into South Florida.
Chesapeake Utilities Corporation (NYSE: CPK) is a diversified energy services holding company headquartered in Dover, Delaware. Through its operating subsidiaries, the company engages in natural gas distribution, transmission and storage; propane distribution; wholesale propane supply; and contract compression and natural gas liquids processing. Its core mission is to provide safe, reliable and cost-effective energy solutions to residential, commercial and industrial customers across multiple U.S.
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The article "Chesapeake Utilities Q1 Earnings Call Highlights" was originally published by MarketBeat.
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