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Essential Utilities Inc. (WTRG - Free Report) reported third-quarter 2020 earnings per share of 23 cents, which missed the Zacks Consensus Estimate by 11.5%. The reported earnings were 52% lower than 48 cents per share recorded in the year-ago quarter.
GAAP earnings per share for the reported quarter were 22 cents compared with 38 cents in the year-ago quarter.
Total Revenues
Third-quarter revenues of $348.6 million were up 43.1% year over year. The year-over-year improvement in total revenues was due to contribution from its acquired natural gas assets, increased volume, growth and rate, along with surcharge increases in the regulated water segment. Total revenues for the reported quarter surpassed the Zacks Consensus Estimate by 1.9%.
Essential Utilities Inc. Price, Consensus and EPS Surprise
The Regulated Water segment contributed $255.7 million to total third-quarter revenues. Revenues from this segment improved 5.3% year over year. Customer additions through organic and inorganic means, rate increase, along with higher residential volumes contributed to the revenue growth.
The Regulated Natural Gas segment contributed $92.1 million to total third-quarter revenues.
Highlights of the Release
The company continues to expand operations through strategic acquisitions. It has signed purchase agreements for municipal water and wastewater acquisitions that are expected to add more than 212,000 water and wastewater retail customers, as well as nearly $363 million in expected rate base.
Post the third quarter, Essential Utilities’ water segment subsidiary, Aqua Illinois closed the acquisition of the Rockwell Utilities water and wastewater system, adding $5.15 million in rate base. For the first nine months of 2020, customer growth for the company’s water utilities totaled 1.5%, including organic growth.
Year to date, the regulated water segment has received rate awards in different jurisdictions that led to an increase in annualized revenues of the company by $21 million. The regulated natural gas segment has received rate awards in the said period that boosted annualized revenues by $1 million. The company currently has rate proceedings pending in Virginia, Indiana and New Jersey worth $2.9 million.
Operation and maintenance expenses increased 66.1% year over year to $138.2 million. This was attributed to an increase in Peoples transaction-related costs, and the regulated natural gas segment’s operation as well as maintenance expenses.
Operating income for the reported quarter was $105.2 million, down 1.2% year over year.
Interest expenses increased 52.3% to $49.8 million from $32.7 million in the year-ago quarter.
Financial Highlights
Current assets were $311.3 million as of Sep 30, 2020 compared with $2,015.1 million on Dec 31, 2019. Long-term debt was $5,152.9 million as of Sep 30, 2020, higher than $2,943.3 million on Dec 31, 2019.
Essential invested $554.1 million in the first nine months of 2020 to improve regulated water and natural gas infrastructure systems. This investment does not include an additional $53.5 million that was invested by Peoples, pre-closing, during the period from Jan 1, 2020 to Mar 15, 2020.
Guidance
Essential reiterated its 2020 earnings guidance in the range of $1.53-$1.58 per share. The company expects full-year earnings at the top end of the guidance. It expects the customer base from the water segment to expand 2-3% in 2020, depending on regulatory approval.
The company plans to invest $550 million in the regulated water segment and $400 million in the regulated gas segment in 2020. This capital expenditure is part of its total investment plan of $2.8 billion through 2022.
Upcoming Water Utility Releases
Primo Water Corporation (PRMW - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 5. The Zacks Consensus Estimate for the quarter is pegged at 15 cents per share, which indicates growth of 150% from the year-ago reported figure.
California Water Service Group (CWT - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 6. The Zacks Consensus Estimate for the quarter is pegged at $1.14 per share, which suggests growth of 29.6% from the year-ago reported figure.
Global Water Resources, Inc. (GWRS - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 6. The Zacks Consensus Estimate for the quarter is pegged at 5 cents per share, on par with the year-ago reported figure.
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Essential (WTRG) Q3 Earnings Lag, Revenues Beat Estimates
Essential Utilities Inc. (WTRG - Free Report) reported third-quarter 2020 earnings per share of 23 cents, which missed the Zacks Consensus Estimate by 11.5%. The reported earnings were 52% lower than 48 cents per share recorded in the year-ago quarter.
GAAP earnings per share for the reported quarter were 22 cents compared with 38 cents in the year-ago quarter.
Total Revenues
Third-quarter revenues of $348.6 million were up 43.1% year over year. The year-over-year improvement in total revenues was due to contribution from its acquired natural gas assets, increased volume, growth and rate, along with surcharge increases in the regulated water segment. Total revenues for the reported quarter surpassed the Zacks Consensus Estimate by 1.9%.
Essential Utilities Inc. Price, Consensus and EPS Surprise
Essential Utilities Inc. price-consensus-eps-surprise-chart | Essential Utilities Inc. Quote
Segment Details
The Regulated Water segment contributed $255.7 million to total third-quarter revenues. Revenues from this segment improved 5.3% year over year. Customer additions through organic and inorganic means, rate increase, along with higher residential volumes contributed to the revenue growth.
The Regulated Natural Gas segment contributed $92.1 million to total third-quarter revenues.
Highlights of the Release
The company continues to expand operations through strategic acquisitions. It has signed purchase agreements for municipal water and wastewater acquisitions that are expected to add more than 212,000 water and wastewater retail customers, as well as nearly $363 million in expected rate base.
Post the third quarter, Essential Utilities’ water segment subsidiary, Aqua Illinois closed the acquisition of the Rockwell Utilities water and wastewater system, adding $5.15 million in rate base. For the first nine months of 2020, customer growth for the company’s water utilities totaled 1.5%, including organic growth.
Year to date, the regulated water segment has received rate awards in different jurisdictions that led to an increase in annualized revenues of the company by $21 million. The regulated natural gas segment has received rate awards in the said period that boosted annualized revenues by $1 million. The company currently has rate proceedings pending in Virginia, Indiana and New Jersey worth $2.9 million.
Operation and maintenance expenses increased 66.1% year over year to $138.2 million. This was attributed to an increase in Peoples transaction-related costs, and the regulated natural gas segment’s operation as well as maintenance expenses.
Operating income for the reported quarter was $105.2 million, down 1.2% year over year.
Interest expenses increased 52.3% to $49.8 million from $32.7 million in the year-ago quarter.
Financial Highlights
Current assets were $311.3 million as of Sep 30, 2020 compared with $2,015.1 million on Dec 31, 2019. Long-term debt was $5,152.9 million as of Sep 30, 2020, higher than $2,943.3 million on Dec 31, 2019.
Essential invested $554.1 million in the first nine months of 2020 to improve regulated water and natural gas infrastructure systems. This investment does not include an additional $53.5 million that was invested by Peoples, pre-closing, during the period from Jan 1, 2020 to Mar 15, 2020.
Guidance
Essential reiterated its 2020 earnings guidance in the range of $1.53-$1.58 per share. The company expects full-year earnings at the top end of the guidance. It expects the customer base from the water segment to expand 2-3% in 2020, depending on regulatory approval.
The company plans to invest $550 million in the regulated water segment and $400 million in the regulated gas segment in 2020. This capital expenditure is part of its total investment plan of $2.8 billion through 2022.
Upcoming Water Utility Releases
Primo Water Corporation (PRMW - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 5. The Zacks Consensus Estimate for the quarter is pegged at 15 cents per share, which indicates growth of 150% from the year-ago reported figure.
California Water Service Group (CWT - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 6. The Zacks Consensus Estimate for the quarter is pegged at $1.14 per share, which suggests growth of 29.6% from the year-ago reported figure.
Global Water Resources, Inc. (GWRS - Free Report) is scheduled to release third-quarter 2020 earnings on Nov 6. The Zacks Consensus Estimate for the quarter is pegged at 5 cents per share, on par with the year-ago reported figure.
Zacks Rank
Currently, Essential carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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