H2O America Sets 2026 EPS Outlook Including Quadvest

H2O America (NYSE: HTO) reported lower third-quarter earnings as acquisition-related expenses and a larger share count offset benefits from rate increases, while the water utility established 2026 adjusted earnings guidance that includes the recently completed Quadvest acquisition and related financing.

The company reported GAAP diluted earnings per share of $0.99 for the quarter ended September 30, 2026, down from $1.27 a year earlier. Adjusted diluted EPS, which excludes non-utility real estate transactions and merger, acquisition and integration costs, fell to $1.04 from $1.27. Adjusted net income was $45.2 million, broadly flat with $45.5 million in the prior-year quarter, while GAAP net income declined to $43.0 million from $45.1 million.

H2O America said the year-over-year decline in adjusted diluted EPS primarily reflected share issuances. Higher rates, pass-through water-cost revenue and changes in usage provided support, but were offset by higher water-supply costs, depreciation, administrative and general expenses, property taxes and maintenance costs.

For the first nine months of 2026, GAAP diluted EPS was $2.13, compared with $2.48 in the same period of 2025. Adjusted diluted EPS decreased to $2.30 from $2.53 even as adjusted net income rose to $95.3 million from $88.4 million. The company said year-to-date adjusted EPS included a net $0.17 headwind from the March equity raise for Quadvest, partly offset by interest income and savings.

Guidance Reflects Quadvest Financing and Integration

H2O America narrowed its standalone 2026 adjusted diluted EPS guidance to $3.10 to $3.16. It also initiated acquisition-inclusive guidance of $2.91 to $2.97, reflecting Quadvest, the pending Cibolo Valley transaction and the financing of those acquisitions. The $2.94 midpoint of the acquisition-inclusive range is 6% below the $3.13 midpoint of the standalone range.

Management expects 2026 and 2027 EPS, including Quadvest, to fall below the ranges implied by its long-term 6% to 8% adjusted EPS compound annual growth target. The company continues to believe 2027 dilution relative to its standalone plan could be 10% to 20%.

Over the full 2026-2030 period, however, H2O America expects adjusted EPS growth from its 2025 base of $2.99 per share to be at or above the top of its 6% to 8% target range. That expectation is based on its capital investment program, a projected 13% compound annual growth rate in rate base, anticipated Quadvest accretion beginning in 2028, and the achievement of what management described as fair and timely regulatory outcomes.

The company adjusted its 2026 company-funded capital expenditure plan to approximately $465 million from $483 million. It invested $325 million in infrastructure through September and maintained its 2026-2030 capital budget at $2.7 billion, excluding the addition of Quadvest. Roughly 80% of the five-year budget is expected to qualify for timely regulatory recovery, and nearly half is allocated to distribution-system investments.

Quadvest Expands Texas Operations

H2O America completed the Quadvest acquisition on October 1. Quadvest provides water and wastewater services in southeast Texas through a regulated utility and a utility-like wholesale business. As of September 30, it had 62,200 active connections and another 98,300 connections under contract and pending development.

The regulated Quadvest business had a base purchase price of $483.6 million, while the wholesale operation had a base purchase price of $56.4 million, both subject to adjustments under the purchase agreements. Under Texas’ fair-market-value statute, the purchase price of the regulated business will serve as its initial ratemaking rate base.

H2O America expects the Cibolo Valley acquisition to close on November 2, 2026. Texas Water plans to file a combined-company general rate case in the first half of 2027, seeking recognition of more than $300 million in water-supply and reliability investments made during 2024-2026, as well as the Quadvest and Cibolo Valley rate bases.

The Texas Public Utility Commission, however, adopted a decision in October that resulted in a $0.2 million annual revenue decrease in Texas Water’s system improvement charge proceeding, compared with the company’s requested $5.1 million increase.

Regulatory Proceedings Remain Central to Growth Plan

In Connecticut, the company is seeking a $28.8 million annual revenue increase to recover approximately $145 million of investments. Evidentiary hearings have been completed, with a proposed decision expected in mid-December.

Maine Water’s first consolidated general rate case requests a $9.5 million annual revenue increase to recover about $36 million of investments. H2O America expects new rates to take effect by May 2027.

San Jose Water is separately seeking recovery of an estimated $176 million investment in its Williams Station PFAS project, with a proposed decision expected in the second quarter of 2027. An $8.4 million rate-base offset increase tied to $52.9 million of incremental advanced-metering investments took effect on July 1, 2026.

H2O America said it does not expect additional common-equity issuance through 2027. It settled 6.44 million shares under a forward agreement at the end of September, generating $330 million of net proceeds to help fund the Quadvest closing. The company still expects to issue $100 million to $200 million of debt for the transaction, though it said the timing is flexible. Available capacity under its bank credit lines totaled $169 million at September 30.

The outlook remains subject to the timing and outcome of regulatory proceedings, the completion and integration of acquisitions, customer water demand, weather and seasonality, water-supply costs, infrastructure and contamination risks, financing conditions and unexpected expenses. H2O America also cautioned that quarterly results may not indicate full-year performance because of seasonality and other factors.