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American Water Q3 Earnings Miss on Higher Costs Despite Revenue Growth
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Key Takeaways
American Water's Q3 adjusted EPS of $2.00 misses estimates, despite 4.1% revenue growth to $1.51 billion.
Higher operating costs weigh on AWK's earnings, while rate hikes and acquisitions fuel growth.
AWK narrows its 2026 EPS outlook to $6.07-$6.12 and projects $6.53-$6.63 for 2027, signaling further growth.
American Water Works Company Inc. (AWK - Free Report) reported third-quarter 2026 adjusted earnings of $2.00 per share, which missed the Zacks Consensus Estimate of $2.11 by 5.21%. The bottom line increased 5.8% from $1.89 in the year-ago quarter.
Earnings benefited from authorized rate increases and acquisitions, while higher operating costs weighed on profitability.
Total Revenues
Revenues of $1.51 billion surpassed the Zacks Consensus Estimate of $1.47 billion by 2.57% and rose 4.1% year over year.
Regulated Businesses generated net income of $407 million in the third quarter, up 6.3% from $383 million in the prior-year period. Operating revenues increased $60 million year over year.
The improvement primarily reflected authorized revenue increases from completed general rate cases and infrastructure proceedings, along with incremental contributions from acquisitions. However, unfavorable weather reduced operating revenues by $18 million during the quarter.
Since the beginning of 2026, American Water has received authorization for $284 million in additional annualized revenues, comprising $179 million from general rate cases and $105 million from infrastructure surcharges.
American Water Works Company, Inc. Price, Consensus and EPS Surprise
Total operating expenses increased 3.8% to $869 million from $837 million in the year-ago quarter. Operation and maintenance expenses rose 1.5% to $531 million from $523 million.
Depreciation and amortization expenses increased 8.4% to $245 million, reflecting higher capital investments. General taxes rose 8% to $94 million from $87 million.
Despite the increase in costs, operating income advanced 4.4% to $641 million from $614 million. The operating margin improved to 42.5% from 42.3% in the year-ago period.
AWK's Financing Costs Continue to Pressure Earnings
Interest expense increased 5.7% to $167 million from $158 million a year earlier. The increase resulted from additional short- and long-term debt used primarily to finance infrastructure investments and acquisitions.
Interest income declined to $3 million from $23 million. Total other expenses, net, widened to $142 million from $120 million.
Income before taxes increased to $499 million from $494 million, while net income attributable to common shareholders rose 2.1% to $387 million from $379 million. GAAP earnings remained unchanged at $1.94 per share.
American Water Advances Capital Investment and Acquisitions
American Water invested $2.8 billion in infrastructure improvements and growth during the first nine months of 2026, including $437 million for regulated acquisitions.
Through Sept. 30, the company completed acquisitions involving approximately 80,600 customer connections across 68 systems in 10 states. These additions included water and wastewater systems acquired from Nexus Water Group.
The company also had 19 acquisitions under agreement, representing approximately 36,000 customer connections and $182 million in investment. Its acquisition pipeline exceeded 1.5 million customer connections.
AWK's Cash Flow Improves Amid Higher Investments
Cash and cash equivalents totaled $121 million as of Sept. 30, 2026, compared with $98 million at the end of 2025. Net cash provided by operating activities increased 17.1% to $1.64 billion during the first nine months from $1.40 billion in the prior-year period.
In the first nine months of 2026, capital expenditures rose to $2.41 billion from $2.08 billion. Long-term debt increased to $13.99 billion from $12.78 billion at year-end 2025.
The company maintained a total debt-to-capital ratio of 58%, within its long-term target of less than 60%. Available liquidity was $1.34 billion at quarter-end.
Merger Update
The proposed merger with Essential Utilities also progressed. Kentucky, Ohio and Virginia have approved the transaction, while settlements have been reached in Pennsylvania, North Carolina and Texas. The company expects the merger to close by the end of the first quarter of 2027, subject to the remaining regulatory approvals and closing conditions.
American Water Raises 2026 Outlook and Initiates 2027 Guidance
American Water narrowed its 2026 adjusted earnings guidance to $6.07-$6.12 per share from the earlier range of $6.02-$6.12. The revised outlook reflects continued regulatory execution and contributions from authorized rate increases. The Zacks Consensus Estimate is currently pegged at $6.08 per share.
Management also initiated standalone adjusted earnings guidance of $6.53-$6.63 per share for 2027, representing approximately 8% growth at the midpoint. The company expects capital investments of $4.1 billion in 2027.
American Water increased its standalone capital investment plans to more than $20 billion for 2026-2030 and more than $48 billion for 2026-2035. It maintained long-term earnings and dividend growth targets of 7-9%.
American States Water (AWR - Free Report) is slated to report third-quarter 2026 results on Nov. 4, after market close. The Zacks Consensus Estimate for AWR’s third-quarter EPS is pegged at $1.09, implying an increase of 2.8% from the prior-year figure. The company has a dividend yield of 2.6%.
Essential Utilities Inc. (WTRG - Free Report) is scheduled to report its third-quarter 2026 results on Nov. 3, after the market opens. The Zacks Consensus Estimate for WTRG’s third-quarter EPS is pegged at 35 cents, implying an increase of 6.1% from the prior-year figure. The company has a dividend yield of 3.4%.
Consolidated Water Co. Ltd (CWCO - Free Report) is set to report its third-quarter 2026 results on Nov. 9. The Zacks Consensus Estimate for CWCO’s third-quarter EPS is pegged at 24 cents, implying a decrease of 29.25% from the prior-year figure. The company has a dividend yield of 2.1%.
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American Water Q3 Earnings Miss on Higher Costs Despite Revenue Growth
Key Takeaways
American Water Works Company Inc. (AWK - Free Report) reported third-quarter 2026 adjusted earnings of $2.00 per share, which missed the Zacks Consensus Estimate of $2.11 by 5.21%. The bottom line increased 5.8% from $1.89 in the year-ago quarter.
Earnings benefited from authorized rate increases and acquisitions, while higher operating costs weighed on profitability.
Total Revenues
Revenues of $1.51 billion surpassed the Zacks Consensus Estimate of $1.47 billion by 2.57% and rose 4.1% year over year.
Regulated Businesses generated net income of $407 million in the third quarter, up 6.3% from $383 million in the prior-year period. Operating revenues increased $60 million year over year.
The improvement primarily reflected authorized revenue increases from completed general rate cases and infrastructure proceedings, along with incremental contributions from acquisitions. However, unfavorable weather reduced operating revenues by $18 million during the quarter.
Since the beginning of 2026, American Water has received authorization for $284 million in additional annualized revenues, comprising $179 million from general rate cases and $105 million from infrastructure surcharges.
American Water Works Company, Inc. Price, Consensus and EPS Surprise
American Water Works Company, Inc. price-consensus-eps-surprise-chart | American Water Works Company, Inc. Quote
American Water Faces Rising Operating Expenses
Total operating expenses increased 3.8% to $869 million from $837 million in the year-ago quarter. Operation and maintenance expenses rose 1.5% to $531 million from $523 million.
Depreciation and amortization expenses increased 8.4% to $245 million, reflecting higher capital investments. General taxes rose 8% to $94 million from $87 million.
Despite the increase in costs, operating income advanced 4.4% to $641 million from $614 million. The operating margin improved to 42.5% from 42.3% in the year-ago period.
AWK's Financing Costs Continue to Pressure Earnings
Interest expense increased 5.7% to $167 million from $158 million a year earlier. The increase resulted from additional short- and long-term debt used primarily to finance infrastructure investments and acquisitions.
Interest income declined to $3 million from $23 million. Total other expenses, net, widened to $142 million from $120 million.
Income before taxes increased to $499 million from $494 million, while net income attributable to common shareholders rose 2.1% to $387 million from $379 million. GAAP earnings remained unchanged at $1.94 per share.
American Water Advances Capital Investment and Acquisitions
American Water invested $2.8 billion in infrastructure improvements and growth during the first nine months of 2026, including $437 million for regulated acquisitions.
Through Sept. 30, the company completed acquisitions involving approximately 80,600 customer connections across 68 systems in 10 states. These additions included water and wastewater systems acquired from Nexus Water Group.
The company also had 19 acquisitions under agreement, representing approximately 36,000 customer connections and $182 million in investment. Its acquisition pipeline exceeded 1.5 million customer connections.
AWK's Cash Flow Improves Amid Higher Investments
Cash and cash equivalents totaled $121 million as of Sept. 30, 2026, compared with $98 million at the end of 2025. Net cash provided by operating activities increased 17.1% to $1.64 billion during the first nine months from $1.40 billion in the prior-year period.
In the first nine months of 2026, capital expenditures rose to $2.41 billion from $2.08 billion. Long-term debt increased to $13.99 billion from $12.78 billion at year-end 2025.
The company maintained a total debt-to-capital ratio of 58%, within its long-term target of less than 60%. Available liquidity was $1.34 billion at quarter-end.
Merger Update
The proposed merger with Essential Utilities also progressed. Kentucky, Ohio and Virginia have approved the transaction, while settlements have been reached in Pennsylvania, North Carolina and Texas. The company expects the merger to close by the end of the first quarter of 2027, subject to the remaining regulatory approvals and closing conditions.
American Water Raises 2026 Outlook and Initiates 2027 Guidance
American Water narrowed its 2026 adjusted earnings guidance to $6.07-$6.12 per share from the earlier range of $6.02-$6.12. The revised outlook reflects continued regulatory execution and contributions from authorized rate increases. The Zacks Consensus Estimate is currently pegged at $6.08 per share.
Management also initiated standalone adjusted earnings guidance of $6.53-$6.63 per share for 2027, representing approximately 8% growth at the midpoint. The company expects capital investments of $4.1 billion in 2027.
American Water increased its standalone capital investment plans to more than $20 billion for 2026-2030 and more than $48 billion for 2026-2035. It maintained long-term earnings and dividend growth targets of 7-9%.
Zacks Rank
American Water currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
American States Water (AWR - Free Report) is slated to report third-quarter 2026 results on Nov. 4, after market close. The Zacks Consensus Estimate for AWR’s third-quarter EPS is pegged at $1.09, implying an increase of 2.8% from the prior-year figure. The company has a dividend yield of 2.6%.
Essential Utilities Inc. (WTRG - Free Report) is scheduled to report its third-quarter 2026 results on Nov. 3, after the market opens. The Zacks Consensus Estimate for WTRG’s third-quarter EPS is pegged at 35 cents, implying an increase of 6.1% from the prior-year figure. The company has a dividend yield of 3.4%.
Consolidated Water Co. Ltd (CWCO - Free Report) is set to report its third-quarter 2026 results on Nov. 9. The Zacks Consensus Estimate for CWCO’s third-quarter EPS is pegged at 24 cents, implying a decrease of 29.25% from the prior-year figure. The company has a dividend yield of 2.1%.