Avista (AVA) Q2 EPS Drops 41%

Avista (AVA -1.15%), a regional regulated electric and natural gas utility serving the Pacific Northwest and Alaska, reported earnings on August 5, 2025, for the second quarter of fiscal 2025. The report showed consolidated net income of $14 million (GAAP). Earnings per diluted share were $0.17 (GAAP). Both figures fell short of consensus analyst estimates of $0.31 per share (GAAP) and $411.39 million in non-GAAP revenue. Overall, it was a challenging quarter, with core utility operations remaining solid but significant losses in non-utility investments led to the miss versus expectations for GAAP EPS.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Background and Core Focus

Avista (AVA -1.15%) is a regulated electric and natural gas utility headquartered in Spokane, Washington. The company provides electric service to approximately 423,000 customers and natural gas to 383,000 customers across Washington, Idaho, and Oregon. The company also owns Alaska Electric Light & Power (AEL&P), supplying electric service in Alaska.

Avista's strategy centers on reliable utility service, careful cost management, and substantial investment in infrastructure and clean energy. Regulatory compliance and setting fair rates are crucial, as state and federal oversight determines the rates it can charge. Success depends on approvals from regulatory bodies, effective resource management, and maintaining a strong workforce to execute and support large capital projects.

Second Quarter Results: What Stood Out

The latest quarter saw utility margin growth in both electric and natural gas operations (non-GAAP).

Natural gas revenue (GAAP) declined to $94 million from $104 million. At the same time, net income from the Avista Utilities segment (GAAP) slipped slightly to $23 million, compared to $24 million in Q2 2024. AEL&P, the Alaska arm, saw net income of $1 million. However, year-to-date contributions declined modestly for the first half of 2025 compared to the same period in 2024.

This portfolio—which includes Avista's investments in clean technology and other ventures outside its core utility business—recorded a $10 million loss, up from a $2 million loss in Q2 2024. Management stated, “We are disappointed by the lower valuations in our investment portfolio during the second quarter, primarily related to our clean technology investments. The value of these investments was negatively impacted by shifting public policy and sentiment.”

Capital expenditure for the first half of fiscal 2025 reached $236 million for utility infrastructure and $10 million for AEL&P. The company plans for $525 million in utility capital investment for 2025 and $3 billion over the five-year period ending in 2029. Notably, no new long-term debt is planned for the remainder of 2025. This follows the issuance of $120 million in debt and $35 million in new equity during the first half of 2025.

Regulatory accomplishments underpinned revenue and margin growth. The company secured multi-year rate plans or settlements in Washington, Oregon, and Idaho. This provides more confidence in future rate recovery and supports management’s outlook for steady, regulated earning streams.

On the risk side, the Energy Recovery Mechanism (ERM)—a cost-sharing arrangement where the company and customers share resource cost over- or under-recoveries—continues to pressure results. Under-recovery drove $9 million in pre-tax expense for the first half of the year, with a $0.12 per share negative impact projected for FY2025. Management describes changes to the ERM as a “multiyear strategy,” rather than an immediate fix, Under-recovery under the Energy Recovery Mechanism (ERM) is likely to persist through 2026 unless regulators agree to modifications.

Other cost pressures showed up in increased employee benefits, salaries, and costs related to wildfire mitigation and insurance. After-tax earnings are also being squeezed by a higher effective tax rate, which climbed to 12.3% from 2.9% for the first half of 2025 due to the return of customer tax credits. That higher rate reduces net profit available to shareholders despite slightly higher utility margins.

However, the company continues to cite sustainability and environmental compliance as central to its long-term business plan. Management remains committed to building a cleaner portfolio and investing in advanced technologies, but also warns that public policy and regulatory shifts could further affect investment results.

Looking Ahead: Guidance and Investor Notes

The company reaffirmed its FY2025 consolidated earnings guidance at $2.52–$2.72 per share. However, management cautioned that performance is expected at the low end of the 2025 consolidated earnings guidance range due to $0.15 per diluted share of losses in non-utility segments recorded in the first half of the year. Management predicts that the main regulated utility will deliver results nearer to the upper end of its $2.43–$2.61 per diluted share guidance band for 2025, supported by margin growth and regulatory settlements already captured this year. The Alaska utility is projected to contribute $0.09–$0.11 per share in 2025.

For the longer term, the company expects annual earnings growth of 4–6% from the 2025 base year. However, the company specifically called out continued volatility in non-utility investments, persistent elevated costs, and further regulatory risks related to the ERM as factors for investors to watch. These elements could all drive swings in results until market conditions or regulatory arrangements improve.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.