American Water Works Earnings Call Highlights Robust Growth

American Water Works ((AWK)) has held its Q4 earnings call. Read on for the main highlights of the call.

American Water Works recently held its earnings call, reflecting a generally positive sentiment among stakeholders. The company reported strong financial performance, successful rate cases, and significant capital investments, though it also acknowledged some challenges such as increased operating costs and regulatory hurdles in California.

Strong Financial Performance

American Water delivered solid financial results for 2024, achieving earnings of $5.39 per share, which reflects an EPS growth of over 8%. This commendable performance was supported by $0.12 per share from favorable weather conditions and an additional $0.09 per share attributed to incremental interest income from the HOS note.

Successful Rate Cases

The company successfully completed major general rate cases in several states, including Illinois and California. These achievements led to increased revenues aimed at supporting infrastructure investments, demonstrating the company’s effective regulatory strategy.

Capital Investment and Acquisitions

In 2024, American Water invested over $3 billion in infrastructure improvements and finalized acquisitions that added nearly 70,000 customer connections. These efforts align with the company’s 2% compounded annual growth target, highlighting its commitment to expansion and modernization.

Higher Operating Costs

Despite the positive financial outcomes, American Water faced increased operating and maintenance expenses, which rose by $0.22 per share. These costs were primarily driven by employee-related expenses and production costs associated with fuel, power, and chemicals.

Challenges in California Regulation

While the company had success with rate cases, the decision in California did not fully recognize a decoupling mechanism. This prompted American Water to file a motion for rehearing to ensure that customer benefits are adequately acknowledged.

Lumpiness in Acquisition Timelines

The company noted variability in acquisition timing, which can lead to inconsistencies in customer growth from year to year. This aspect is crucial for stakeholders to consider when evaluating the company’s growth trajectory.

Affirmation of 2025 Guidance

American Water reiterated its 2025 earnings guidance, projecting earnings of $5.65 to $5.75 per share, which represents an expected 8% EPS growth. This outlook is supported by a robust capital plan and a strategic regulatory approach, underscoring the company’s confidence in its future performance.

In summary, American Water Works’ earnings call conveyed a positive sentiment, highlighting strong financial results and strategic initiatives to support growth. While challenges such as increased costs and regulatory issues were noted, the company’s forward-looking guidance and solid balance sheet indicate a strong position for future success.