Essential Utilities (WTRG) Q2 EPS Up 36%

Key Points

• Earnings per share (GAAP) reached $0.38, beating the analyst estimate of $0.30 (GAAP).

• Revenue (GAAP) grew 18.5% to $514.9 million, ahead of the $469.75 million GAAP expectation.

• The quarterly dividend was raised by 5.25% to $0.3426 per share, as declared on July 30, 2025.

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Essential Utilities (NYSE:WTRG), a regulated utility specializing in water, wastewater, and natural gas services, reported its second quarter 2025 results on August 1, 2025. The key news was significant outperformance versus expectations. Earnings per share (GAAP) were $0.38, surpassing the analyst GAAP estimate of $0.30. Revenue (GAAP) reached $514.9 million, well above the GAAP revenue forecast of $469.75 million. Net income and operating income (GAAP) both saw double-digit growth. The quarter was marked by strong growth in both major segments, with regulated water segment revenues increasing by 9.9% and regulated natural gas segment revenues increasing by 38.3%, execution on infrastructure spending, and continued acquisitive expansion. Overall, the period reflected robust business performance and steady progress on the company's core strategies.

Source: Analyst estimates for the quarter provided by FactSet.

Business Overview and Key Success Factors

Essential Utilities provides regulated water, wastewater, and natural gas services in several states, including Pennsylvania, Ohio, North Carolina, and New Jersey. It operates mainly through two core segments: Regulated Water, which includes both water and wastewater systems, and Regulated Natural Gas. The company serves millions of residential, commercial, and industrial customers.

Staying competitive requires navigating a complex regulatory landscape, investing in essential infrastructure, and maintaining high service reliability. Rate awards are crucial to recover spending on system upgrades. The company has focused on expanding through strategic acquisitions and increasing environmental compliance, especially with regulations targeting contaminants like PFAS (per- and polyfluoroalkyl substances), which require significant treatment investments.

Highlights and Key Developments in the Quarter

The quarter was notable for extensive regulatory progress and continued growth. Essential Utilities secured $92.6 million in new base water segment rate awards and surcharges across Pennsylvania, Ohio, North Carolina, and New Jersey as of July 31, 2025, and $8.2 million in natural gas rate approvals as of July 31, 2025. Rate cases still pending across North Carolina, Texas, Ohio, and Virginia offer potential for nearly $96.5 million in additional annual revenue as of July 31, 2025. The company expanded its use of regulatory mechanisms like Weather Normalization Adjustments for natural gas, which helps stabilize revenues when weather varies from typical patterns.

Infrastructure investment remained a central focus. Essential Utilities invested $613 million in capital projects in the first half of 2025, with a clear path toward a $1.4 to $1.5 billion full-year infrastructure investment target for 2025. The company plans to deploy $7.8 billion in capital from 2025 through 2029, targeting aging pipes, system modernization, and compliance with new EPA rules on PFAS. More than 320 PFAS remediation projects are planned. Gas system upgrades also continued, with the aim of reducing methane leaks and modernizing distribution networks.

The company executed on its strategy of growth through acquisitions. In July 2025, it closed a $37.75 million deal to acquire the Beaver Falls wastewater system, which serves approximately 3,200 direct customers and about 3,800 equivalent dwelling units (a common water/wastewater measurement of service scale). Year to date 2025, systems acquired serve about 10,300 customers for a combined purchase price of $58 million. Four additional signed agreements, including the large DELCORA sewer system transaction, could add significant customers and revenue if closed. The acquisition pipeline now represents about 400,000 potential new customers.

Segment performance was strong across the board. In the Regulated Water segment, revenue grew 9.9%, supported by new customers, rate increases, and compliance-related surcharges; Operations and maintenance (O&M) costs for the Regulated Water segment rose 4.7% compared to Q2 2024. The Regulated Natural Gas segment jumped 38.3% in GAAP revenue, with Essential’s regulated natural gas segment reported a 38.3% increase in quarterly revenue, driven primarily by higher purchased gas costs, increased rates, and other surcharges, while O&M expenses were relatively flat year-over-year. Overall, operating income rose 27.5% compared to Q2 2024, and net income (GAAP) increased 43.0% compared to Q2 2024, both aided by rate increases across both business segments. Notably, the company raised its quarterly dividend by 5.25% to $0.3426 per share, marking 35 increases in the past 34 years and extending its record of 80 consecutive years of cash dividends.

Looking Ahead: Guidance and Priorities

Management raised its outlook for 2025, now expecting GAAP earnings per share for the year to finish above the previously issued $2.07 to $2.11 guidance range, due to the contribution of some nonrecurring benefits in the quarter. The company reaffirmed its long-term goal of 5 to 7% compound annual EPS growth through 2027, off an adjusted (non-GAAP) $1.97 per share base for 2024. The capital plan remains unchanged, with $1.4 to $1.5 billion targeted for regulated infrastructure investments in 2025 and $7.8 billion over the next five years. Water and gas rate base growth is expected to continue at approximately 6% and 11% compound annual rates, respectively, with combined regulated utility rate base growing at over 8% annually through 2029.

For investors, areas to monitor in the coming quarters include expense management as operations and maintenance spending continues to rise, execution on the robust M&A pipeline, and outcomes of key rate cases still pending before regulators. The company must balance heavy capital needs with access to debt and equity financing, a process already underway, as $210 million of the planned $315 million equity raise for 2025 has been completed. Continued success on regulatory cost recovery, acquisition closings, PFAS remediation projects, and maintaining environmental leadership will remain essential.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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