TXNM Energy Navigates Q1 Challenges Amid Long-Term Growth Hopes

TXNM Energy, Inc. reported mixed results for the first quarter ended March 31, 2025, as elevated costs and regulatory headwinds overshadowed modest revenue growth. While the utility’s long-term capital plans and geographic diversification remain intact, the quarter’s sharp earnings decline underscores the challenges of balancing infrastructure investment with near-term profitability.

Revenue Growth Stalls Against Higher Costs

Despite a 10.5% year-over-year rise in total electric operating revenue to $482.79 million, TXNM fell far short of analyst expectations for $562.53 million, signaling a significant revenue miss. The earnings picture worsened on the bottom line: GAAP net income plunged 81% to $8.9 million, while EPS cratered to $0.10, a 98% drop from the prior-year period and a stark miss against the $0.62 consensus estimate. Even the adjusted ongoing EPS of $0.19—excluding one-time items—marked a 54% decline from Q1 2024.

The underperformance stemmed from a trifecta of pressures:
- Rising operating expenses, which surged to $410.9 million from $356.3 million in 2024, driven by higher energy costs, administrative expenses, and depreciation.
- Increased interest charges, climbing to $63.6 million from $53.8 million, as debt levels rose alongside capital spending.
- Lower transmission margins, as market price fluctuations and regulatory delays eroded profitability.

Geographic Divergence: TNMP Shines, PNM Struggles

The company’s dual-state footprint revealed contrasting fortunes. In Texas, TNMP (Texas Utility) reported a 50% jump in ongoing EPS to $0.24, fueled by robust demand from data centers and industrial customers. System peak load hit 3,158 MW in February 2025—a 22% year-over-year increase—highlighting the region’s economic dynamism.

Meanwhile, PNM (New Mexico Utility) faced a steep downturn, with ongoing EPS collapsing to $0.09 from $0.38. The decline reflected the burdens of energy storage demand charges, higher interest expenses, and increased depreciation tied to recent infrastructure projects. Corporate and other operations also dragged, contributing a $0.15 diluted loss against a $0.10 loss in Q1 2024.

Long-Term Vision Amid Short-Term Pain

Despite the quarterly stumble, TXNM reaffirmed its 2025 ongoing EPS guidance of $2.74–$2.84 (midpoint: $2.79) and its 7–9% annual growth target through 2029. This confidence hinges on a massive $7.8 billion capital investment plan focused on grid resilience, renewable energy transitions, and data center infrastructure. Key projects include:
- The Permian Basin Reliability Study ($355 million), aimed at supporting industrial growth in West Texas.
- System Resiliency Plans ($566 million), designed to harden grids against extreme weather.

Management emphasized that Q1 typically contributes just 7% of annual earnings, with 55% of results expected in Q3—a seasonal pattern tied to summer demand and rate adjustments. The company also cited progress on regulatory fronts, including PNM’s rate case stipulation, which could alleviate some of the utility’s financial pressures.

Market Reaction and Outlook

TXNM’s stock dipped 0.38% premarket to $52.47 but remained near its 52-week high of $55.50, suggesting investors are prioritizing long-term value over short-term volatility. Analysts will scrutinize whether the company can sustain its 12.4% CAGR for TNMP’s rate base through 2029—a critical lever for profitability—while managing rising costs and regulatory risks.

Conclusion: A Prudent Bet on Grid Modernization

While Q1 2025 was a rough patch for TXNM, the utility’s $7.8 billion capital roadmap positions it as a key player in the energy transition. The company’s Texas operations, particularly TNMP’s data center-driven growth, provide a solid foundation. However, New Mexico’s struggles highlight execution risks as TXNM scales up projects in cost-sensitive markets.

Investors should weigh the 7–9% long-term growth target against near-term headwinds like elevated interest expenses and regulatory delays. With 55% of annual earnings concentrated in Q3, the next quarter will be pivotal in testing whether TXNM can deliver on its guidance. For those willing to look past the short-term noise, the utility’s focus on grid resilience and renewable integration aligns with structural trends in energy demand—making it a compelling, if uneven, opportunity.