Essential Utilities Q2 Earnings Call Highlights

Second-quarter earnings were broadly stable: GAAP EPS was $0.37 versus $0.38 a year earlier, while adjusted EPS was $0.38. Higher regulatory recoveries, water volumes and customer growth were offset by lower gas volumes, increased operating expenses, depreciation and interest costs. The American Water merger remains on track for first-quarter 2027 closing. Essential has secured approvals in Kentucky, Ohio and Virginia, reached a settlement in principle in Texas, and continues regulatory proceedings in other states. Essential is expanding investment and customer growth: It invested $662 million in infrastructure during the first half of 2026 and expects record full-year spending of $1.7 billion. The board also approved a 5.25% dividend increase, while planned acquisitions could add roughly 200,000 customers for about $282 million. Essential Utilities reported second-quarter 2026 GAAP earnings of $0.37 per share, compared with $0.38 per share in the prior-year quarter, as higher regulatory recoveries and water volumes were offset by lower gas volumes, increased operating expenses, depreciation and interest costs. Excluding approximately $0.01 per share of merger-related expenses, the company reported adjusted non-GAAP earnings of $0.38 per share. Essential remains confident it can achieve its target of 5% to 7% annual earnings-per-share growth, using 2024 adjusted earnings of $1.97 per share as the baseline. Earnings benefited from a $0.06-per-share increase in regulatory recoveries and surcharges, a $0.02 increase from higher water volumes, and a $0.01 benefit from water customer growth. The customer growth reflected both acquisitions and organic expansion. Those gains were partly offset by $0.02 per share of higher operating expenses, a $0.02 impact from lower gas volumes, and $0.06 of other costs. The latter category included $0.03 from increased depreciation and $0.03 from higher interest expense and lower allowance for funds used during construction, or AFUDC. Operating and maintenance expenses rose about $5.1 million, or 3.5%, from a year earlier. The increase was primarily due to higher employee-related costs, including merit increases and medical claims, along with greater water and wastewater production costs and expenses associated with newly acquired customers. The increase was partly offset by lower insurance expense due largely to an insurance recovery, reduced gas-segment bad debt expense, and lower customer-assistance surcharge costs. Excluding merger-related costs, operating and maintenance expenses increased 2.6%, which is in line with the company’s historical norms. Essential has received regulatory approvals for its planned merger with American Water in Kentucky, Ohio and Virginia. The company continues to expect the transaction to close during the first quarter of 2027. Proceedings are continuing in the remaining jurisdictions. Essential has reached a settlement in principle in Texas, while public input hearings in New Jersey are scheduled for August. Testimony was filed in North Carolina at the end of the prior week, and the Illinois matter is before an administrative law judge with a statutory process scheduled to conclude by November. In Pennsylvania, the companies remain in negotiations with parties while evidenti.