AWK — American Water Works Company, Inc.

Summary of American Water's Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings Per Share (EPS): $1.61 for Q2 2026, up from $1.49 in Q2 2025, reflecting over 8% growth.
• Year-to-Date Adjusted EPS: $2.62, compared to $2.51 in the same period of 2025.
• Revenue Growth: Driven by authorized rate increases to recover investments.
• Operating and Maintenance (O&M) Costs: Remained flat year-over-year, indicating effective cost control.
• Debt-to-Capital Ratio: 58% as of June 30, 2026.
• Long-term Debt Issuance: Completed a $500 million issuance at 4.625% with strong demand.

2. Strategic Updates and Business Highlights

• Regulatory Success: Completed three rate cases in West Virginia, Maryland, and Pennsylvania, recovering nearly 100% of capital investments.
• Capital Investments: $1.8 billion invested in capital projects and acquisitions year-to-date, aimed at improving service and operational efficiency.
• Acquisition Activity: Closed on the acquisition of Nexus Water Group systems ahead of schedule, adding approximately 47,000 customer connections.
• Merger Progress: Continued positive momentum on the proposed merger with Essential Utilities, receiving approvals from Kentucky, Ohio, and Virginia, with expectations to close by Q1 2027.

3. Forward Guidance and Outlook

• 2026 Adjusted EPS Guidance: Affirmed range of $6.02 to $6.12, anticipating 8% growth for the year.
• Long-term Growth Expectations: Projected EPS and dividend growth in the range of 7% to 9% through 2030 and beyond.
• Customer Growth Target: Aiming for 2% customer growth in 2026.

4. Bad News, Challenges, or Points of Concern

• Pennsylvania Rate Case Outcome: Received a final order approving a $75 million increase, lower than the requested $160 million, which may impact revenue expectations.
• Regulatory Environment: Ongoing discussions around affordability and potential impacts from state legislation in Indiana and Pennsylvania could pose challenges.
• Merger Approval Risks: The merger with Essential Utilities is under scrutiny, and while support has been positive, external factors could influence the outcome.

5. Notable Q&A Insights

• Missouri Rate Case: Uncertainty around the benefits of the new forecast year legislation; no quantification provided on potential rate increases.
• Indiana Affordability: The state’s focus is primarily on electric affordability; American Water's rates remain competitive.
• Regulatory Strategy in Pennsylvania: Emphasis on capital investment-driven rate cases, with potential for expanding the Distribution System Improvement Charge (DSIC) mechanism to recover more capital.
• Merger Impact on Rate Cases: While economies of scale are expected post-merger, immediate capital investment needs will likely continue to drive the frequency of rate cases.

Overall, American Water reported solid financial performance and strategic progress, although it faces regulatory challenges and must navigate the complexities of its merger with Essential Utilities.