American Water Q3 2026 Earnings: New Rates Support Adjusted EPS Growth
American Water reported Q3 2026 operating revenue of $1.510 billion, up 4.1% year over year, while diluted GAAP EPS remained flat at $1.94 due to higher financing costs and share dilution. Adjusted diluted EPS rose to $2.00, driven by favorable regulatory outcomes and acquisitions, though offset by weather impacts and rising operating expenses. Management raised the lower end of its 2026 adjusted EPS guidance to $6.07–$6.12 and introduced 2027 guidance. Key investor risks include rising operating and financing costs, weather variability, and ongoing regulatory approvals required for the pending Essential Utilities merger.
American Water (NYSE: AWK) reported Q3 2026 operating revenue of $1.510 billion, up approximately 4.1% from $1.451 billion, while diluted GAAP EPS was unchanged at $1.94. Adjusted diluted EPS rose to $2.00 from $1.89 as new rates and acquisitions supported the regulated business, although unfavorable weather and higher operating, depreciation, and financing costs limited the benefit.
Core Earnings Data
For the quarter ended September 30, revenue increased by $59 million and operating income rose by $27 million. Net income attributable to common shareholders increased by $8 million, but the higher weighted-average share count kept GAAP EPS flat year over year.
The $2.00 adjusted EPS figure excludes a $0.03-per-share after-tax weather impact and $0.03 per share of after-tax costs associated with the pending Essential Utilities merger. These adjustments added a total of $0.06 to reported GAAP EPS.
| Metric | Q3 2026 | Q3 2025 | YoY Change |
|---|---|---|---|
| Operating revenue | $1.510 billion | $1.451 billion | Approx. +4.1% |
| Operating income | $641 million | $614 million | Approx. +4.4% |
| Operating margin | Approx. 42.5% | Approx. 42.3% | Approx. +0.1 ppt |
| Net income attributable to common shareholders | $387 million | $379 million | Approx. +2.1% |
| Diluted GAAP EPS | $1.94 | $1.94 | Flat |
| Adjusted diluted EPS | $2.00 | $1.89 | Approx. +5.8% |
Regulated Business Performance
Regulated Businesses generated net income of $407 million, up from $383 million a year earlier. Operating revenue increased by $60 million, primarily because completed rate cases and infrastructure proceedings authorized recovery of capital and acquisition investments. Closed acquisitions also contributed incremental revenue.
Weather partly offset those gains, reducing the year-over-year revenue comparison by $18 million. Through September 30, American Water had added approximately 81,000 customer connections through acquisitions, including the Nexus Water systems.
Since the beginning of 2026, regulators have authorized $284 million of additional annualized revenue, consisting of $179 million from general rate cases and $105 million from infrastructure surcharges. The company also has pending rate cases and surcharge filings representing $360 million of requested annualized incremental revenue. These figures are annualized authorizations and requests rather than revenue recognized entirely in the third quarter.
Rate Recovery Outpaced Operating Costs, but Financing and Dilution Capped GAAP EPS
Regulated operating expenses increased by $30 million. Higher purchased water costs and usage, purchased power, and chemical costs were partly offset by lower technology-related expenses and lower maintenance materials and supplies costs. Depreciation within the regulated business increased by $18 million as the asset base expanded.
At the consolidated level, operating income increased by $27 million, but pretax income rose by only $5 million. Interest expense increased by $9 million as additional short- and long-term debt funded capital investments and acquisitions, while interest income declined to $3 million from $23 million. In addition, diluted weighted-average shares rose to 199 million from 195 million, offsetting the per-share benefit of higher net income and leaving GAAP EPS unchanged.
Capital Spending and the Balance Sheet
American Water invested $2.8 billion in infrastructure improvements and growth during the first nine months of 2026, including $437 million for regulated acquisitions. Management said the company remains on track for approximately $3.7 billion of total 2026 investment, including acquisitions.
Net property, plant and equipment increased to $32.692 billion at September 30 from $30.576 billion at the end of 2025. Long-term debt rose to $13.987 billion from $12.777 billion over the same period, consistent with management’s explanation that debt was used to support investment and acquisitions. Cash and cash equivalents increased to $121 million from $98 million.
Earnings Guidance
American Water raised the lower end of its 2026 adjusted EPS range by $0.05 while maintaining the upper end. It also introduced standalone 2027 adjusted EPS guidance, with the midpoint representing 8% growth from the midpoint of the updated 2026 range.
| Metric | Latest Guidance or Target | Previous | Change |
|---|---|---|---|
| 2026 adjusted EPS | $6.07-$6.12 | $6.02-$6.12 | Lower end raised by $0.05 |
| 2027 standalone adjusted EPS | $6.53-$6.63 | Not previously issued | New; 8% midpoint growth |
| Long-term EPS growth | 7%-9% | 7%-9% | Affirmed |
| Long-term rate base growth | 8%-9% | 8%-9% | Affirmed |
The 2026 adjusted EPS range excludes merger transaction costs, weather impacts, and incremental interest income through February 13, 2026 related to the amended Homeowner Services Group seller note. American Water also maintained its 2% acquired-customer growth target and 7%-9% long-term dividend-per-share growth target.
The updated standalone capital plan calls for more than $20 billion of investment from 2026 through 2030 and more than $48 billion through 2035. The standalone 2027 investment plan is $4.1 billion.
Management View
President and CEO John Griffith attributed the company’s 2026 performance partly to regulatory outcomes that provide recovery of investments made in its utility systems. Management expressed confidence in its ability to continue executing against its long-term plans.
American Water continues to target completion of its proposed merger with Essential Utilities by the end of the first quarter of 2027. Three states have approved the transaction, while settlements have been reached in Pennsylvania, North Carolina, and Texas. Regulatory approvals and integration planning remain in progress.
Risks Investors Should Watch
- Operating cost pressure: Purchased water, power, chemicals, and depreciation costs increased during the quarter. Continued increases could reduce the earnings benefit from new rates.
- Financing requirements: The capital and acquisition program has increased long-term debt and interest expense. Higher financing costs could continue to limit the conversion of operating income growth into net income growth.
- Weather variability: Unfavorable weather reduced the third-quarter revenue comparison by $18 million, and the company’s adjusted guidance excludes weather impacts.
- Regulatory and merger execution: Future growth depends partly on timely rate recovery, pending regulatory decisions, and completion of the Essential Utilities merger under acceptable conditions.
Summary
American Water’s third-quarter revenue and operating income increased as authorized rates and acquisitions supported its regulated operations. Higher production, depreciation, and financing costs, together with a larger share count, kept GAAP EPS flat, while adjusted EPS increased after weather and merger-related items were excluded. The main points to monitor are the conversion of capital investment into authorized revenue, funding costs, weather effects, and progress toward the planned Essential Utilities merger.
This article may include AI-generated content that is human-reviewed, which is for reference and general information purposes only and does not constitute investment advice.
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