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Essential Utilities (WTRG) FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (FY25)· Utilities· Feb 26, 2026

Source: earnings call transcript

Executive summary

Essential Utilities FY25 — Strong Earnings Outperformance and Merger Progress

Essential Utilities reported strong FY25 results, with GAAP EPS of $2.20 exceeding guidance, driven by regulatory recoveries and gas volumes, despite some weather impacts. Shareholder approval for the American Water merger was secured with overwhelming support, and regulatory filings are progressing, with an expected Q1 2027 close. Management reaffirmed its 5% to 7% multi-year EPS growth target through 2027, emphasizing continued capital investment and dividend growth.

Highlights

5

  • Delivered 2025 GAAP EPS of $2.20, exceeding guidance range of $2.07 to $2.11.

  • Increased quarterly dividend by 5.25% in July, marking 35 increases in 34 years and 80 consecutive years of payments.

  • Invested a record $1.4 billion in regulated infrastructure in 2025.

  • Completed 3 municipal acquisitions in 2025, adding over 12,700 new customers.

  • Achieved nearly 95% shareholder approval for the American Water merger in record speed.

Concerns

3

  • Lower water volumes due to wetter weather led to an $8.6 million offset to revenue growth.

  • Merger-related expenses partially offset non-recurring benefits in 2025 earnings.

  • DELCORA transaction remains stalled by a stay from a Federal bankruptcy court judge related to the city of Chester's bankruptcy.

Guidance & targets

CategoryTargetConfidence
American Water Merger Close
Q1 2027
high materiality
High
Multi-year EPS Growth Rate
5% to 7% CAGR
high materiality
High
Payout Ratio
60% to 65%
medium materiality
High
Regulated Infrastructure Investments
$1.7 billion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Water and Wastewater
The water and wastewater business contributed the majority of the incremental annualized revenue from regulatory recoveries in 2025.
Incremental Annualized Revenue from Regulatory Recoveries: $92.6 million
————
Gas
The gas business also contributed to incremental annualized revenue from regulatory recoveries in 2025.
Incremental Annualized Revenue from Regulatory Recoveries: $8.9 million
————

Deals & partnerships

American Water Combination to create a premier multistate utility

Shareholder approval secured with nearly 95% of shares voted in favor. Seven state regulatory filings completed by year-end 2025.

Multiple municipal entities Acquisition of water and wastewater systems approximately $58 million

Three municipal acquisitions completed in 2025, showcasing diversity of growth strategy.

Multiple municipal entities Acquisition of water and wastewater systems

Three signed purchase agreements for systems in Pennsylvania and Texas, expected to close in the first half of 2026.

Greenville Municipal Water Authority Acquisition of water assets

Aqua Pennsylvania's acquisition of assets approved by the Pennsylvania Public Utility Commission without modification.

DELCORA Acquisition of water and wastewater systems

Transaction stalled by a stay put in place by a Federal bankruptcy court judge related to the bankruptcy of the city of Chester. Optimism for movement following Supreme Court ruling on Chester Water Authority.

Capital programs

Regulated Infrastructure Investment completed $1.4 billion
Period spend: $1.4 billion
Spent to date: $1.4 billion
Start: FY25

Benefit:Improved reliability and resiliency

Record investment in regulated infrastructure for 2025.

PFAS Capital Plan underway $450 million

Benefit:Over 50 advanced treatment systems deployed

Multi-year plan to ensure finished water meets federal maximum contaminant levels for PFAS chemicals.

Regulated Infrastructure Investment planned $1.7 billion
Period spend: $1.7 billion
Start: FY26

Benefit:Improved reliability and resiliency

Expected regulated infrastructure investments for 2026.

Risks & headwinds

Lower water volumes due to weather FY25

$8.6 million revenue offset

Merger-related expenses FY25

Partially offset non-recurring benefits in 2025 EPS

DELCORA transaction stalled by legal proceedings Ongoing

Transaction stalled

Mitigation:Monitoring receiver's next move, ready to participate in overall solution for City of Chester's bankruptcy.

Customer affordability concerns Ongoing

Impact on customer bills

Mitigation:Balancing responsible investments in infrastructure with managing operating costs to support affordability.

What to watch next

DELCORA transaction status

Next quarter
Current Stalled by bankruptcy court stay
Target Movement on PUC proceeding or negotiation on reversionary assets

Why it matters

Resolution of this long-standing acquisition would contribute to customer growth and strategic expansion.

Hopefully, we'll see some movement on DELCORA now that the Supreme Court has ruled, we remain optimistic about the consolidation of Water and Wastewater systems in the United States and look forward to leveraging the combined resources of Essential and American Water to accelerate our business development work.

Find out whether WTRG delivers this. Inve re-checks your case every morning.

Q&A highlights

Analyst asked for the specific non-GAAP 2025 EPS figure after adjustments, noting the company stated it would be above guidance.

Management stated they did not specifically quantify the non-GAAP 2025 EPS but confirmed that even after excluding all one-time items (both positive and negative), the financial performance would still have exceeded the guidance range, as projected.

“No, we didn't specifically, we just gave you kind of the nonrecurring items there, both sort of positive items and then we noted the transaction costs as well. So if you go to that exercise, you can find all those numbers in the Qs and then in the 10-K that will be released later today, you'll see that we still sit favorable to our guidance range really as we projected throughout the course of the year.”

asked by Paul Zimbardo · answered by Daniel Schuller

2 min read 6 chapters

Detailed narrative

American Water Merger Progress

Shareholder approval for the American Water merger was secured with nearly 95% of shares voted in favor, described as a record speed for similar transactions. The company completed 7 state regulatory filings by year-end 2025 and anticipates closing the transaction in Q1 2027. Management expressed confidence in constructive regulatory relationships built over the years to facilitate a positive outcome.

Financial Outperformance and Outlook

Essential Utilities delivered 2025 GAAP EPS of $2.20, surpassing its guidance range of $2.07 to $2.11. This outperformance was driven by regulatory recoveries and higher gas volumes, with non-recurring benefits partially offset by merger-related expenses. The company reaffirmed its long-term goal of 5% to 7% EPS growth (CAGR) for the 2024 through 2027 period, using the 2024 non-GAAP EPS of $1.97 as the baseline.

Capital Investment and Customer Growth

The company invested a record $1.4 billion in regulated infrastructure in 2025, enhancing reliability and resiliency for communities. This investment contributes to rate base growth and supports service quality. Additionally, three municipal acquisitions were completed in 2025, adding over 12,700 new water and wastewater customers, with three more signed purchase agreements expected to close in the first half of 2026.

Operational Excellence and Sustainability Initiatives

Operational achievements in 2025 included the deployment of over 50 advanced PFAS treatment systems across Pennsylvania and North Carolina, demonstrating industry leadership in addressing water quality. The natural gas segment installed its 100,000th Intelis meter, and across both segments, over 400 miles of main were replaced or retired. The company was recognized for sustainability for the fifth consecutive year by Newsweek and for climate leadership by USA TODAY.

Regulatory Activity and Rate Cases

In 2025, Essential completed regulatory recoveries totaling $101.5 million in incremental annualized revenue, with $92.6 million from water and wastewater and $8.9 million from gas. For 2026, $12.4 million in recoveries have been completed thus far, and the Water and Wastewater segment has filed for an additional $101.9 million in requested annualized revenue increases. Management aims to minimize regulatory lag while considering customer affordability.

Chester Water Authority and DELCORA Transaction

The Pennsylvania Supreme Court ruled that the Chester Water Authority is self-owned, impacting the city of Chester's bankruptcy exit strategy by removing a potential asset for sale. This ruling may unblock the DELCORA transaction, which remains stalled by a federal bankruptcy court stay. Essential Utilities expressed readiness to participate in a solution that assists the city of Chester and ensures affordable, quality water for customers.

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