Fresh off a 4-year high, gas utility stocks are poised for more gains in 2026

A basket of gas utility stocks had their best annual gain since 2021, and market watchers believe 2026 could be another strong year for the subsector.

The group of eight stocks selected by S&P Global Energy surged 13.7% in 2025, notching a second consecutive year of gains.

The performance extended the subsector's rebound from a slump in 2022 and 2023, when inflation, rising interest rates and a string of warm winters weighed on earnings. The companies addressed those issues in rate cases just in time to take advantage of an improved outlook for gas demand and broader sector trends.

"We believe the momentum for the natural gas utilities … group can continue in 2026 as the group offers an opportunity to deploy capital in an area relatively insulated within the larger utility landscape," Mizuho Securities USA said in a Dec. 23, 2025, research report.

Gas utilities capitalize on strong 2025 setup

Heading into 2025, Reaves Asset Management CEO Jay Rhame thought gas utilities were well-positioned after securing rate increases. But he was concerned that opportunities to invest in power infrastructure to serve data centers would cause electric utility stocks to outperform gas distributor equities.

"Ultimately, though, I didn't predict that we'd have several gas utilities up 20%," Rhame told Platts, part of S&P Global Energy.

Stock price gains for UGI Corp., Spire Inc. and Atmos Energy Corp. exceeded 20% in 2025, helping the gas utility basket outperform the S&P 500 Utilities sector. Northwest Natural Holding Co., Southwest Gas Holdings Inc. and One Gas Inc. also posted double double-digit percentage gains, with Chesapeake Utilities Corp. notching a modest increase.

Rate case execution and solid earnings played a role, but relative valuation may have been the key, according to Rhame, who co-manages the Virtus Reaves Utilities exchange-traded fund.

"They were all pretty cheap — and that ended up probably being the biggest driver out of all of them," he said.

Investors no longer see terminal value in gas utilities

Market watchers also pointed to the continued shift in sentiment on natural gas, which has been underscored by recent deals to acquire gas utilities.

"There was a point a few years ago when analysts and investors and portfolio managers were basically putting a terminal value on gas utility stocks — because in a zero-carbon world, how does a gas utility operate?" said Tim Winter, portfolio manager of the Gabelli Utilities Fund.

Winter pointed to the transition from a Biden administration focused on phasing out gas use to a second Trump term that has championed fossil fuels. Even in states pursuing net-zero emissions, some policymakers have conceded that gas is a practical energy source, he told Platts.

"There's been a pendulum shift, and natural gas is back in favor," he said.

Gas utilities have earnings momentum

At the start of 2026, gas utility fundamentals look strong, sector observers said.

The heating season got off to a cold start in parts of the US and demand was up, supporting cash flow and debt reduction during the critical winter earnings period. Benchmark gas prices have backed down after spiking in December, tempering affordability concerns, they said.

Critically, the seven gas utilities within Mizuho's coverage universe "delivered above and beyond what we asked for in our 2025 outlook, which was to demonstrate consistency on earnings guidance trajectory."

Five of those companies either increased long-term EPS guidance or rebased their earnings outlook based on outperformance in 2025, Mizuho noted. The analysts rated six of the stocks "outperform," with New Jersey Resources Corp. and UGI getting their strongest ratings.

Sector trends could affect gas utility stocks in 2026

New Jersey Resources posted the gas utility basket's only annual decline. Both Mizuho and Rhame said incoming New Jersey Gov. Mikie Sherrill's focus on utility prices likely weighed on sentiment.

The potential for candidates to once again paint utilities as the villain remains a headline risk for gas utility stocks heading into November's midterm and gubernatorial elections, Rhame said. However, affordability issues are chiefly tied to power market dynamics, so gas utilities could "stay out of the headlines" and emerge as relative winners, Mizuho said.

On the data center front, Mizuho said gas utilities have less exposure to the investment cycle than electric utilities, but that could yield an unexpected benefit: Investors could view them as defensive alternatives to the artificial intelligence trade, which can be volatile. At the same time, some gas utility operators that support power generation for data centers could reap upside, Mizuho said.

Finally, sector observers were encouraged by a new cycle of gas infrastructure investments that have supplemented ongoing pipeline replacement programs.

"The real driver is the rate base growth and capital investments," Winter said. "They're not going through the roof like they are with the electric utilities, but there are projects being added."