Wells Fargo Securities analysts upgraded Spire Inc.'s shares to outperform, citing recent price weakness and the completion of a Missouri rate case.

Spire's shares have underperformed their gas local distribution company peers by about 12% so far in 2018, including 5% underperformance during the past month, Wells Fargo analysts said in a June 14 note. Wells Fargo had previously rated Spire at market perform.

The company in April completed its Missouri rate case, resolving uncertainty associated with how the Missouri Public Service Commission would handle the company's rate requests and the implications of changes to the corporate tax code. And with an eye to funding its Spire STL Pipeline LLC project and other utility infrastructure investments, Spire in May sold 2.3 million shares of its common stock and raised about $158.1 million.

"With the [Missouri] rate case and secondary equity offering in the rear view mirror, we consider this to be an attractive entry point," the analyst note said. "We see upside to our estimates should [Spire] find new gas infrastructure investment opportunities, though we note that incremental CapEx would likely trigger additional equity needs."

Spire's pipeline replacement plans should last for 15 to 20 years, giving clear visibility into the company's longer term investment opportunities and related earnings potential. The analysts expect a 5% compound annual growth rate, which falls within the company's 4% to 7% target growth rate.

Wells Fargo sees over 95% of Spire's earnings continuing to come from regulated assets, and the jurisdictions in which the company operates — Missouri, Alabama and Mississippi — allow for relatively minimal lag when it comes to cost recovery of key capital expenditures.

"Looking ahead, we believe management is focused on driving cost efficiencies across the regulated footprint, getting the STL Pipeline approved and constructed, and identifying new gas infrastructure opportunities," the note said. The 400,000 Dth/d planned STL Pipeline would include about 60 miles of new 24-inch-diameter pipeline, running from an interconnection with the Rockies Express Pipeline LLC system in Illinois to a 20-inch-diameter transmission pipeline in Missouri owned by a Spire utility subsidiary.

The biggest risk to Spire at this point would be delays in the STL Pipeline project, which is waiting on Federal Energy Regulatory Commission approval. The company is hoping to make the most of late summer and early fall for clearing the pipeline route.