Essential Utilities (WTRG) Q3 2026 Earnings Call: EPS steigt um 9 %, Fusion auf Kurs

Wichtigste Erkenntnisse

• Essential Utilities wies für das dritte Quartal 2026 ein GAAP-EPS von 0,36 US-Dollar aus, was einem Zuwachs von 9 % gegenüber 0,33 US-Dollar im Vorjahreszeitraum entspricht. Das bereinigte Non-GAAP-EPS belief sich nach Bereinigung um fusionsbedingte Kosten auf 0,38 US-Dollar.
• Regulatorische Kostenerstattungen und Zuschläge trugen 0,06 US-Dollar je Aktie bei, wobei rund 65 % des Vorteils auf das Wassersegment entfielen. Höhere Wasservolumina steuerten weitere 0,01 US-Dollar je Aktie bei.
• Die Investitionsausgaben beliefen sich seit Jahresbeginn auf rund 1,1 Milliarden US-Dollar. Nach Angaben der Unternehmensführung liegt das Unternehmen weiterhin auf Kurs, im Jahr 2026 den Rekordwert von 1,7 Milliarden US-Dollar für Infrastruktur auszugeben.
• Die geplante Fusion mit American Water soll nach Angaben des Managements weiterhin planmäßig bis zum Ende des ersten Quartals 2027 abgeschlossen werden. In Kentucky, Ohio und Virginia wurden bereits Genehmigungen erteilt, während Vergleiche in Pennsylvania, North Carolina und Texas noch auf die endgültige Genehmigung warten.
• Essential Utilities hat Kaufverträge über Wasser- und Abwasseranlagen mit einem Gesamtvolumen von rund 290 Millionen US-Dollar unterzeichnet, die Systeme zur Versorgung von voraussichtlich rund 208.000 Kunden umfassen. Die aktive Akquisitionspipeline umfasst rund 400.000 potenzielle Neukunden.
• Das Unternehmen bestätigte seine langfristige EPS-Prognose nicht erneut und verwies auf die ausstehende Fusion sowie die Ungewissheit über die künftige Finanzierungsstruktur des kombinierten Konzerns. Das Management hielt jedoch an seiner Erwartung von Investitionsausgaben in Höhe von mindestens 8,7 Milliarden US-Dollar über die nächsten fünf Jahre fest.

Wichtige Finanzkennzahlen

Geschäftliche und operative Entwicklung

Niedrigere Betriebs- und Instandhaltungsaufwendungen stützten die Quartalsergebnisse. Der O&M-Aufwand sank um rund 0,6 %, was auf Versicherungsleistungen und geringere Forderungsausfälle im regulierten Gassegment zurückzuführen war, die teilweise durch fusionsbedingte Kosten ausgeglichen wurden.

Der Aufwand für Sozialleistungen an Arbeitnehmer, einschließlich Erstattungen aus medizinischen Stop-Loss-Versicherungen, ging um rund 3,5 Millionen US-Dollar zurück. Nach Angaben des Managements war der Großteil dieses Rückgangs auf die Stop-Loss-Erstattung zurückzuführen.

Regulatorische Maßnahmen blieben ein wesentlicher Ergebnistreiber. Essential Utilities schloss im Jahr 2026 Tarifverfahren oder Zuschläge ab, die zusätzlichen annualisierten Erlösen in Höhe von 70,5 Millionen US-Dollar entsprechen; rund 75 % davon entfielen auf den Wasser- und Abwasserbereich.

Das Wasser- und Abwassersegment hat in fünf Bundesstaaten anhängige Tarif- oder Zuschlagsverfahren laufen, mit denen annualisierte Erhöhungen von mehr als 78,5 Millionen US-Dollar angestrebt werden. Die Erdgastochter in Pennsylvania strebt eine Erhöhung der Basistarife um 163,2 Millionen US-Dollar an; ein Verwaltungsrichter empfahl rund 105 Millionen US-Dollar.

Auch die Akquisitionsaktivitäten machten Fortschritte. Im Oktober schloss das Unternehmen mehrere kleinere Wasser- und Abwassertransaktionen in Texas, North Carolina und Pennsylvania ab oder kündigte diese an. Die unterzeichneten Vereinbarungen belaufen sich auf insgesamt rund 290 Millionen US-Dollar und sollen Systeme umfassen, die etwa 208.000 Kunden versorgen.

Ausblick des Managements

Das Management rechnet mit dem Abschluss der Fusion mit American Water bis zum Ende des ersten Quartals 2027. Das Unternehmen erwartet vor Ende 2026 endgültige Entscheidungen in North Carolina und Texas, wenngleich kein fester Zeitplan genannt wurde.

In Pennsylvania rechnet das Management gegen Ende November mit einer Beschlussempfehlung eines Verwaltungsrichters, gefolgt von einer Entscheidung der Public Utility Commission voraussichtlich kurz nach Beginn des Jahres 2027. Vergleichsgespräche in New Jersey wurden als konstruktiv beschrieben, während eine Anordnung der Kommission in Illinois gemäß dem gesetzlichen Zeitplan des Bundesstaates in Kürze erwartet wurde.

Essential Utilities liegt weiterhin auf Kurs, im Jahr 2026 den Rekordbetrag von 1,7 Milliarden US-Dollar in die Infrastruktur zu investieren. Zudem bekräftigte das Management seine Erwartung, in den kommenden fünf Jahren mindestens 8,7 Milliarden US-Dollar zu investieren.

Das Unternehmen gab keine langfristige EPS-Prognose ab. Das Management erklärte, künftige Ergebnisprognosen und Finanzierungsentscheidungen ließen sich nach Vollzug der Fusion besser durch das gemeinsame Führungsteam und das Board of Directors festlegen.

Risiken und wichtige Beobachtungsfelder

• Die Transaktion mit American Water bedarf noch der endgültigen regulatorischen Genehmigungen in mehreren Bundesstaaten, darunter Pennsylvania, North Carolina und Texas.
• Das Gastarifverfahren in Pennsylvania steht weiterhin unter dem Vorbehalt einer endgültigen Kommissionsanordnung. Die beantragte Erhöhung um 163,2 Millionen US-Dollar liegt über der Empfehlung des Verwaltungsrichters von rund 105 Millionen US-Dollar.
• Das Management betonte die Notwendigkeit, ein ausgewogenes Verhältnis zwischen Infrastrukturinvestitionen, angemessenen Renditen und der Bezahlbarkeit für die Kunden zu wahren.
• Die DELCORA-Transaktion ist im Zusammenhang mit dem Konkursverfahren der Stadt Chester weiterhin durch einen Bundesinsolvenzrichter ausgesetzt, wenngleich das Management angab, dass der Kaufvertrag von American Water übernommen werden kann.
• Das Management erklärte, es prüfe noch die politischen Veränderungen infolge der Wahl und habe die Auswirkungen des neu erwähnten PFAS-Personenschaden-Vergleichs unter Beteiligung von 3M noch nicht bewertet.

Höhepunkte der Fragerunde mit Analysten

Die Analysten konzentrierten sich auf Fusionsgenehmigungen, das Fehlen einer langfristigen Prognose, Kostenentwicklungen und den zeitlichen Ablauf der Regulierung.

Bezüglich der Fusion erklärte das Management, dass die Vergleiche in North Carolina und Texas noch vor Jahresende endgültig entschieden werden könnten. Maßnahmen in Pennsylvania werden für etwa Anfang 2027 erwartet, während die Gespräche in New Jersey sich weiter in Richtung eines potenziellen Vergleichs bewegen.

Hinsichtlich der Prognose erläuterte das Management, dass eigenständige EPS-Projektionen angesichts des für Anfang 2027 erwarteten Fusionsabschlusses und künftiger Finanzierungsentscheidungen des kombinierten Unternehmens nicht mehr angemessen seien. Die Investitionspläne wurden beibehalten.

Das Management stellte zudem klar, dass das Quartal von Erstattungen aus der medizinischen Stop-Loss-Versicherung profitierte. Trotz fusionsbedingter Aufwendungen in Höhe von rund 4,9 Millionen US-Dollar ging der gesamte O&M-Aufwand im Jahresvergleich dennoch um etwa 900.000 US-Dollar zurück.

Zu kommunalen Übernahmen erklärte das Management, dass die Wahlergebnisse keine wesentlichen Bedenken für anhängige oder potenzielle Transaktionen hervorgerufen hätten, insbesondere in Pennsylvania.

Vollständiges Transkript der Telefonkonferenz

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Hello, everyone. Thank you for joining us, and welcome to the Essential Third Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Ed Vallejo, Director of Investor Relations. Ed, please go ahead.

Edward Vallejo

Thank you, and good morning, everybody. Thank you for joining us for our third quarter 2026 earnings call. If you did not receive a copy of our press release, you can find the release on our Investor Relations website. The earnings call slides will also be found there alongside a webcast of the event.

During this conference call, both in our prepared remarks and in answers to your questions, we may make forward-looking statements that represent our expectations regarding future events and our future financial performance. These statements are predictions based upon our expectations, estimates and assumptions. However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed Forms 10-K and 10-Q.

During this call and in our third quarter 2026 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our third quarter 2026 earnings press release available on our Investor Relations website.

We will begin with Chris Franklin, our Chairman and CEO, who will provide an update on the company. Then Dan Schuller, our Chief Financial Officer, will provide an overview of the financial results.

And with that, I will turn it over to Chris.

Christopher Franklin

Thanks, Ed, and good morning, everyone. Let's start on Page 5 with a few corporate updates. We'll start with our pending merger with American Water. Our regulatory approval process continues to progress nicely. We've reached constructive settlement agreements in Pennsylvania, North Carolina and Texas, all of which remain subject to final approvals from the respective state public utility commissions. We've already secured regulatory approvals in Kentucky, Ohio and Virginia, which marked major milestones as we progress toward closing the merger. With all of these positive developments, we continue to expect the merger to close by the end of the first quarter in 2027.

At the same time, our integration planning is moving at a full speed. Our integration teams have been busy collaborating across everything from organizational design to operational and financial processes, to IT systems and branding. It's been incredibly gratifying to see the teams from both Essential and American Water working so collaboratively and side-by-side to shape our future of the company.

Turning now to the quarterly results. We reported GAAP earnings per share of $0.36, an increase of 9% over last year. These GAAP EPS results include about $0.02 of merger-related expenses, bringing our non-GAAP EPS to $0.38 for the quarter.

Overall, it was a solid quarter that underscores the steady, consistent growth we are driving across both our water and gas businesses, as well as responsible expense management. A key driver of that performance is our ongoing commitment to system reliability and customer service. Year-to-date, we've invested about $1.1 billion of capital, keeping us on track to invest a record $1.7 billion in needed infrastructure improvements and upgrades in 2026.

All right. Now, on the regulatory front, we currently have rate cases or infrastructure surcharges pending in Texas, Virginia, Illinois, Indiana and New Jersey, along with our natural gas rate case in Pennsylvania. We recently received a proposed decision from the ALJ in the natural gas case recommending a revenue increase of approximately $105 million.

Now we continue to engage constructively with the Pennsylvania Public Utility Commission, the Governor's office and the various stakeholders regarding the state's regulatory environment. Related to this, you may have seen that Chairman DeFrank recently established an ROE working group, and we will be meeting over the coming months to evaluate options for establishing the cost of capital used in rate cases and DSIC filings. We are optimistic that the process will yield some improvements in the regulatory process and, frankly, a greater understanding by all the parties of the capital needs and the overall focus on affordability.

And finally, reinforcing our long-standing commitment to shareholder value, on October 21, our Board of Directors declared a quarterly dividend payment on December 1, 2026, to shareholders of record on November 10, 2026. Essential Utilities has paid consecutive quarterly cash dividends for over 80 years and has increased the dividend 36x in the last 35 years, a record we are very proud of.

And, Dan, on that note, I'll hand it over to you for a deeper look at our quarterly numbers.

Daniel Schuller

Thanks, Chris, and good morning, everyone. Today, my remarks will focus on our strong financial performance and the primary drivers of our results. Let's turn to Slide 8 to review our year-over-year EPS bridge, beginning with our Q3 2025 earnings of $0.33 per share. In terms of positive drivers, earnings per share this quarter benefited from a $0.06 increase in regulatory recoveries and surcharges, with about 65% of this coming from our water segment, and $0.01 from higher water volumes. These gains were partially offset by $0.02 from increased depreciation and amortization and another $0.02 from higher interest and lower AFUDC. This brings us to GAAP earnings per share of $0.36 for the quarter.

Now you'll see the details of our operations and maintenance expenses when you see our 10-Q, but let me give you some color here. O&M decreased by approximately 0.6%, or about $900,000. This decrease was primarily driven by insurance recoveries, as well as a decrease in bad debt expense in our regulated gas segment, offset by merger-related expenses.

Coming back to earnings. If we adjust our GAAP earnings per share of $0.36 to exclude the nonrecurring merger-related costs, our adjusted non-GAAP earnings per share were $0.38. A full reconciliation is available in our earnings release and in the appendix to this presentation.

Turning to Slide 9, let me provide an update on our regulatory activity. Thus far in 2026, we have finalized rate cases or surcharges representing $70.5 million in incremental annualized revenue. Approximately 75% of this total is derived from our water and wastewater operations, with the remainder coming from our gas business.

Looking ahead, our regulatory pipeline remains on track. Our water and wastewater segment currently has cases or surcharge proceedings pending in 5 states representing over $78.5 million in requested annualized increases. Our natural gas subsidiary has a base rate case pending here in Pennsylvania for $163.2 million. And as Chris mentioned, the ALJ has recommended a revenue increase of approximately $105 million.

This rate case filing is essential to supporting our long-term infrastructure improvement plan, which enhances system safety and reliability while continuing to drive emissions reductions. We expect a final order in this case in December. And as always, we manage these filings carefully to ensure we continue delivering safe, reliable service and earn a fair return on our invested capital while remaining highly sensitive to customer affordability.

And with that, I'll turn the call over to Chris. Chris?

Christopher Franklin

Well, thanks, Dan. Let's move to Slide 11, and we'll summarize our acquisition activity. Here, we show a selection of our business development opportunities, and our business development group had a very busy October. We started the month by completing the $1.1 million acquisition of Dril-Quip, a small water and wastewater system in Harris County, Texas. We also entered into an asset purchase agreement to acquire the North Carolina water and wastewater assets of Central States Water Resources. These assets serve approximately 4,100 customers, and we paid about $3.5 million.

Then on October 28, we entered into an asset purchase agreement for the acquisition of the water and wastewater assets of the Buckingham Springs system in Pennsylvania. These systems serve 1,300 customers, and we are paying $2.8 million for that acquisition. Finally, on that same day, we entered into an asset purchase agreement for the acquisition of the wastewater assets of the Hempfield Township Municipal Authority in Pennsylvania, which serves about 1,200 customers, for $2.2 million.

The company has also signed purchase agreements for additional water and wastewater systems in North Carolina and Virginia. In total, we've signed asset purchase agreements totaling approximately $290 million in purchase price, which are expected to serve approximately 208,000 customers.

Now this includes our DELCORA transaction, which remains under a stay put in place by a federal bankruptcy judge related to the bankruptcy of the city of Chester. And I'll remind you that the fully enforceable agreement of sale with DELCORA is assumable by American Water. Our active pipeline of potential water and wastewater acquisitions represents approximately 400,000 potentially new customers to the company.

And with that, I'll wrap things up and hand it back to the operator so we can take your questions.

Operator

[Operator Instructions] Your first question comes from the line of Travis Miller with Morningstar Inc.

Fragen und Antworten

Travis Miller

I'm going to intentionally leave this one a little open here, but thoughts on the election? You're obviously operating in some key states that were featured in the election yesterday. Affordability, also an issue. Municipal M&A, potentially an issue. So I would just leave this open for any of your thoughts there.

Christopher Franklin

Yes. I'll tell you, it's a lot to digest, Travis. As you might imagine, there's some pretty big changes in the states where we operate. I will say this, though, just for starters. We are a 140-year-old utility. I've been at this company for nearly 35 years. My team has been with me for over a decade plus. And we have relationships on both sides of the aisle in all of our states. We work very hard at that, not only on the regulatory side but also the legislative side.

And so we'll have to meet some new people, get to know them. We'll have to get to know what is important to them in terms of their issues and then assess our work from there. But I think we're -- like so many people today, we're just in a digestion period at the moment.

Travis Miller

Okay. That's fair. Just real quick, municipal M&A, anything you saw from the election locally that might impact that either way, either existing pending or potential?

Christopher Franklin

I don't think so. A lot of the municipal folks in Pennsylvania, where we sit today, were not up for election. So, not as much on the municipal side that we see in terms of change, positive or negative, for municipal M&A. I think the transactions we have in the works, there doesn't seem to be any particular concerns about those. So I feel like business as usual in the largest part on our relationships with potential deals.

Operator

Your next question comes from the line of Paul Zimbardo with Jefferies.

Paul Zimbardo

Just one first for me. Just on the -- I noticed that long-term guidance was not included in the new press release. Just -- is it a change in the outlook? Or just could you give any color on why not reaffirm the plan with the update today?

Christopher Franklin

I think as we look forward, the reality is that -- and I think we've communicated this as best we could over the last year here, that we -- to give earnings per share guidance just doesn't make a whole lot of sense. We feel very confident that the transaction will close early in the new year. And how the business is financed will be largely up to the combined team, the combined Board and management team. So I think we decided here that earnings guidance going forward is best described by our -- the successor team here.

I will say this, though, Paul. We continue to feel strongly that we're going to invest capital. We've said we're going to be over at least $8.7 billion over the next 5 years in capital spend invested in our systems. So I don't think you should expect a great variation from the work we've been doing over the last decade plus.

Paul Zimbardo

Okay. Understood. And then one small one. Could you quantify what that insurance recovery item was during the quarter?

Daniel Schuller

Yes, Paul, I think you'll see this in the 10-Q that comes out. The insurance recovery is really tied to stop-loss insurance. So you think about health insurance cases that are significant claims. Last quarter, we noted that those claims were high because we hadn't yet had the stop-loss reimbursement. But this quarter, we're seeing that reimbursement come back through the income statement and sort of bringing those employee-related costs down. So you'll see in the Q that employee benefits, including that medical claim stop-loss reimbursement, decreased thus by about $3.5 million, most of that really being driven by that stop-loss recovery.

Paul Zimbardo

Okay. Got it. So the $3.5 million is net of the recoveries. Got it.

Daniel Schuller

Yes. So I think it's important to say in terms of the quarter, we had the positive benefit there. We had the benefit in terms of lower bad debt. But we also had about $4.9 million of merger-related expenses. And you'll see in the Q that O&M is still down by about $900,000. So even with the merger-related expenses, other costs came in, in line or lower than sort of typical or lower than we had last year. So very strong quarter from an O&M perspective here at the company.

Operator

Your next question comes from the line of Gregg Orrill with UBS.

Gregg Orrill

Two questions there. First, what are your expectations around converting the Texas and North Carolina settlements to final approvals? When does that occur, and what's involved there?

And secondly, I guess there was a significant PFAS settlement yesterday around personal injury in 3M. And just wondering if there are any implications for the company?

Christopher Franklin

Yes. Let's take the first one. So North Carolina and Texas, we believe those are on track. As you know, we have settlements in each of our states. And although it's not a defined schedule, we would expect that we would see adjudication in both states before the end of the year. So I think we feel comfortable with that.

On the PFAS, listen, I'm happy to get back to you on that. I'm not sure we're -- we have any thoughts on any new news from yesterday yet, but happy to reconnect with you on that, Gregg.

Operator

Your next question comes from the line of Davis Sunderland with Baird.

Davis Sunderland

Congrats. I'm sure it's been a very long process getting to where you are in the merger, and 2027 is right around the corner. So congrats on everything you guys have accomplished so far.

Most of my questions have been taken. I guess maybe I'll just round out Gregg's question. Obviously, you touched, Chris, on North Carolina, on Texas. If you could also just address Pennsylvania and New Jersey and the time lines and what to expect before year-end? Or even if things, I guess, carry into Q1, what your guys' latest expectations are and how that may have accelerated or pushed out from what you guys thought a quarter ago?

Christopher Franklin

Sure, sure. Yes. So in Pennsylvania, we're waiting for the administrative law judge to come across with the recommended decision. We'd expect that could be before Thanksgiving, could be a little after, but that's a reasonable time frame. And then it would go to the Public Utility Commission for their action. And as we've said, I think, all along, we'd expect that sometime probably right after the first of the year.

New Jersey, always good discussions there. And I would hope we'd have some news there to share soon. But discussions toward a settlement are, I think, constructive and in a good place. So hopefully, we'll be able to share some news on that one soon. And as I said in my earlier comments, really feel good about a first quarter close here.

Daniel Schuller

And then maybe the one we didn't cover, Davis, was Illinois. And in Illinois, we have a statutory time frame there. So in that statutory time frame, we would expect to hear something quite soon in Illinois in terms of a commission order.

Operator

There are no further questions at this time. I will now turn the call back to Chris Franklin, CEO, for closing remarks.

Christopher Franklin

Thanks again, everyone, for joining us. As always, we stand ready to answer your questions. Feel free to follow up with Dan, myself or Ed, and you have a wonderful day. Thank you.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.