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American States Water (AWR) Q2 FY26 earnings call: guidance

Earnings call· Jun 2026 (Q2 FY26)· Utilities· Aug 6, 2026

Source: earnings call transcript

Executive summary

American States Water Q2 FY26 — Strong Earnings Growth Driven by Water Segment and Dividend Increase

American States Water delivered a strong second quarter, with consolidated EPS rising 25.3% to $1.09, primarily fueled by new rates and increased consumption in its Water segment. The company also announced an 8.2% dividend increase, reflecting confidence in long-term growth. While regulatory frameworks and capital investments support future growth, management noted uncertainty regarding the continuation of favorable water consumption and supply mix trends for the remainder of 2026.

Highlights

5

  • Consolidated EPS increased by $0.22 or 25.3% to $1.09 in Q2 FY26.

  • Water segment EPS increased by $0.18 per share, driven by new rates and a 4% increase in water consumption.

  • Board approved an 8.2% dividend increase, resulting in an annualized dividend rate of $2.82 per share.

  • Completed $200 million at-the-market equity offering program, with no plans for further equity issuance through 2029.

  • Affirmed strong credit ratings of A for AWR and A+ for Golden State Water by S&P.

Concerns

3

  • Uncertainty whether favorable Q2 conditions (4% water consumption increase, favorable supply mix) will continue through H2 2026 or if their positive earnings impact will reverse.

  • Consolidated operating expenses increased by $4.6 million compared to 2025, largely due to higher ASUS construction expenses and overall operating expenses.

  • Interest expense net of interest income increased due to capitalization of debt costs related to certain isolated projects in 2025 with no similar items this year, and reduced interest income from a decrease in regulatory asset balances.

Guidance & targets

CategoryTargetConfidence
ASUS projected EPS contribution
$0.63 to $0.67 per share
medium materiality
High
Dividend compound annual growth rate
more than 7%
high materiality
High
Company-funded capital expenditures
$185 million to $200 million
high materiality
High
Electric GRC capital budgets
approximately $133 million
medium materiality
High
Electric GRC capital projects for advice letters
approximately $17 million plus AFUDC
low materiality
Medium
Electric GRC Return on Equity (ROE)
11.3%
medium materiality
High
Electric GRC Embedded Cost of Debt
5.92%
medium materiality
High
Electric GRC Capital Structure
60% equity and 40% debt
medium materiality
High
Electric GRC Return on Rate Base
9.15%
medium materiality
High
Water GRC capital budgets
approximately $1 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Water
The $0.18 per share increase was largely due to new water rates for 2026, including additional revenues associated with approved capital projects in late 2025 and higher gains generated on investments for a retirement plan, partially offset by an increase in water supply costs, interest expense, net of interest income, and the effective income tax rate.
EPS: $0.91 per share (Q2 FY26)EPS: $0.73 per share (Q2 FY25)Water consumption increase: 4%
$11.4 million increase———
Electric
The $0.01 per share increase is primarily related to rate increases, partially offset by higher overall operating and interest expenses.
EPS: $0.04 per share (Q2 FY26)EPS: $0.03 per share (Q2 FY25)
$700,000 increase———
Contracted Services (ASUS)
Largely due to higher construction activities, an increase in management fee revenues from the resolution of various economic price adjustments and lower interest expenses partially offset by an increase in operating expenses.
EPS: $0.16 per share (Q2 FY26)EPS: $0.13 per share (Q2 FY25)
$6.2 million increase———

Deals & partnerships

Public Advocates Office at the California Public Utilities Commission (Cal Advocates) Acquisition of an existing water system in Norwalk, Los Angeles County

serves almost 900 customer connections located in the city of Norwalk in Los Angeles County. If the settlement agreement is approved by the CPC system will be incorporated into one of Golden State Water's existing ratemaking areas.

Capital programs

Water General Rate Case Capital Budgets requested approximately $1 million
Start: 2028

Golden State Water filed a general rate case application for all of its water regions and the general office. This general rate case will determine new water rates for the years 2028 through 2030. Golden State Water requested capital budgets of approximately $1 million for the 3-year rate cycle. The stated value of $1 million for a 3-year capital budget for a utility of this size appears to be an ASR error. Given the company's annual capex of $185M-$200M, this is likely intended to be $1 billion or a similar large figure. Capturing as stated with this note.

Electric General Rate Case Capital Budgets requested approximately $133 million
Start: 2027

Fair Value Electric filed a general rate case application that will determine new electric rates for the years 2027 through 2030 and Among other things, Fair Value Electric requested capital budgets of approximately $133 million for the 4-year rate cycle

Electric GRC Advice Letter Capital Projects to be filed for recovery approximately $17 million plus AFUDC

and another approximately $17 million plus AFUDC for capital projects to be filed for revenue recovery through advice letters when the projects are completed.

Risks & headwinds

Uncertainty of favorable Q2 conditions continuing remainder of 2026

Favorable conditions (4% water consumption increase, favorable water supply source mix) may not continue through the remainder of 2026 or their positive earnings impact may reverse.

Mitigation:Company monitors factors like climate change, conservation efforts, weather conditions, groundwater quality issues, and operating conditions of groundwater basins.

Consumption fluctuations future

Can fluctuate due to factors like climate change, conservation efforts, weather conditions (e.g., El Nino or La Nina events affecting precipitation levels and outdoor water use).

Mitigation:Company monitors these factors; regulatory mechanisms like modified revenue decoupling and incremental water supply cost balancing account are in place to mitigate some impact.

Water supply mix changes future

Can occur due to unforeseen groundwater quality issues and changes in the operating conditions of groundwater basins and associated pumping facilities.

Mitigation:Regulatory mechanisms like modified revenue decoupling and incremental water supply cost balancing account are in place to mitigate some impact.

Increased consolidated operating expenses Q2 FY26

Increased by $4.6 million compared to 2025, largely due to higher ASUS construction expenses and overall operating expenses.

Increased interest expense net of interest income Q2 FY26

Increased due to capitalization of debt costs related to certain isolated projects approved by the CPUC in 2025 (no similar items in 2026) and reduced interest income from a decrease in regulatory asset balances.

What to watch in Q3 FY26

Norwalk water system acquisition approval

Q4 FY26
Current Joint settlement filed, pending CPUC approval
Target Proposed decision in Q4 2026

Why it matters

Approval will lead to increased water revenues and expansion of regulated operations.

The proposed decision is expected in the fourth quarter of this year.

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Detailed narrative

Q2 Financial Performance

American States Water reported strong Q2 FY26 consolidated EPS of $1.09, a 25.3% increase year-over-year. This growth was primarily driven by new customer rates implemented in 2026 for regulated utilities, a 4% increase in water consumption, and higher construction activities in the Contracted Services (ASUS) segment. The Water segment's EPS rose $0.18 per share, while Electric and ASUS segments also saw increases.

Dividend Policy and History

The Board approved an 8.2% dividend increase, raising the annualized rate to $2.82 per share. This aligns with the company's long-term policy of achieving a compound annual growth rate in dividends of over 7%. American States Water boasts a 72-year streak of consecutive annual dividend increases, a testament to its financial stability and commitment to shareholder returns.

Regulatory Filings and Rate Base Growth

Golden State Water filed a new general rate case application in July 2026 for water rates covering 2028-2030, requesting approximately $1 million (likely ASR error for $1 billion) in capital budgets and reinstatement of full revenue decoupling and supply cost balancing accounts.

Bear Valley Electric also filed a GRC for 2027-2030 rates, requesting $133 million in capital budgets. The adopted average water rate base for Golden State Water grew from $980.4 million in 2021 to $1.732 billion in 2026, representing an 11.3% CAGR.

Capital Investments and Financing

The company's regulated utilities are on track to invest $185 million to $220 million in infrastructure in FY26. American States Water successfully completed its $200 million at-the-market equity offering program in June 2026, raising $39.9 million net in H1 2026, and does not anticipate issuing additional equity through at least the end of 2029.

Norwalk Water System Acquisition

Golden State Water and Cal Advocates filed a joint settlement to acquire a water system serving nearly 900 customer connections in Norwalk, Los Angeles County. If approved by the CPUC, this acquisition is expected to increase water revenues and integrate into an existing ratemaking area, with a proposed decision anticipated in Q4 2026.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.