American Water Works Company Q1 FY26 earnings call AWK

Consolidated adjusted earnings for the first quarter were $1.01 per share, aligning with management's expectations. Revenues saw an increase driven by authorized rate adjustments designed to recover investments across various states. Concurrently, operating and maintenance (O&M) expenses, depreciation, and financing costs rose as anticipated. The company projects that the majority of its full-year EPS growth will materialize in the second half of 2026, primarily due to new rates in key states becoming effective in Q3.

American Water Works secured final orders in West Virginia and Maryland during Q1, which yielded favorable outcomes regarding revenues and allowed Returns on Equity (ROEs). The company currently has active general rate cases underway in five jurisdictions: Virginia, California, Illinois, New Jersey, and Pennsylvania. Management expressed confidence in achieving a balanced outcome in Pennsylvania, despite not reaching a settlement before the procedural deadline, with a recommended decision from the administrative law judge expected in May and new rates anticipated to be effective in August.

The company made significant capital investments in Q1 2026, focusing on critical infrastructure projects such as pipe replacement, PFAS remediation, lead service line removal, and the deployment of smart meters. Legislative successes in Iowa and Indiana are expected to reduce regulatory lag by allowing more timely recovery of investments and adjustments for power and chemical costs. Additionally, American Water successfully advocated for affordability-related bills in Maryland and Virginia, aimed at benefiting low-income customers, reinforcing its commitment to providing affordable service.

Progress on the proposed merger with Essential Utilities continues, with the first state approval granted in Kentucky. Regulatory processes in other states, including Pennsylvania and New Jersey, are proceeding as planned, with decisions expected through the summer and early fall. A Hart-Scott-Rodino notification application is slated for filing in late summer, with the merger still anticipated to close by the end of Q1 2027. Separately, the company has 105,000 customer connections under agreement from deals totaling $565 million, including the completed acquisition of the Nitro wastewater system in West Virginia for $20 million. The acquisition of NEXUS Water Group systems is expected to close by June 30, having received approval from 7 of 8 required regulatory commissions.

As of March 31, the company's total debt-to-capital ratio improved to 58%, following the repayment of a $795 million note in February. On April 1, American Water successfully completed a $700 million long-term debt issuance at 5.2%, which saw strong demand. The 2026 financing plan also includes settling approximately $1 billion in proceeds from an equity forward around mid-year, with another long-term debt issuance planned for Q3 or early Q4. The company maintains strong investment-grade credit ratings from S&P and Moody's.