American Water Works ((AWK)) has held its Q1 earnings call. Read on for the main highlights of the call.
American Water Works recently held its earnings call, reflecting a generally positive outlook for the company. The call highlighted strong earnings growth, a notable dividend increase, and successful regulatory and legislative actions. However, challenges such as increased operating costs and reduced rate case settlements were also discussed.
Strong Earnings Growth
American Water reported earnings of $1.05 per share for the quarter, marking an impressive 11% increase from the previous year’s $0.95 per share. The company has reaffirmed its full-year earnings guidance, anticipating an 8% EPS growth in 2025 compared to 2024, showcasing a robust financial performance.
Dividend Increase
The Board of American Water approved an increase in the quarterly cash dividend from $0.765 per share to $0.8275 per share, representing an 8.2% increase. This decision continues the company’s trend of consistent dividend growth, providing value to shareholders.
Regulatory and Legislative Successes
American Water achieved significant legislative progress with the passage of supportive laws in Missouri, Indiana, and Virginia. These developments are expected to facilitate further investments and help the company achieve its allowed returns, strengthening its operational framework.
Capital Investment and Infrastructure Program
The company invested $518 million in the first quarter, aligning with its goal of $3.3 billion in capital investments by 2025. American Water anticipates continued growth in its regulated rate base at a long-term rate of 8% to 9%, underscoring its commitment to infrastructure development.
Acquisition Pipeline
American Water remains well-positioned for growth through acquisitions, with about 37,000 customer connections under agreement across several states. This strategy is expected to enhance the company’s market presence and customer base.
Higher Operating Costs
Operating and maintenance costs increased by $0.15 per share, driven by employee-related expenses and costs associated with acquisitions completed in 2024. These rising costs present a challenge to the company’s financial management.
Depreciation and Financing Costs
Depreciation increased by $0.11 per share, while financing costs rose by $0.10 per share. These increases reflect the company’s ongoing investment growth, which supports its long-term strategic goals.
Reduced Rate Case Settlements
In Missouri, American Water agreed to a $63 million annualized revenue increase, compared to a request of $107 million. Similarly, in Virginia, a settlement resulted in a $15 million increase, against a $20 million request. These reduced settlements indicate challenges in achieving desired revenue targets.
Forward-Looking Guidance
During the earnings call, American Water provided comprehensive guidance on key financial metrics and strategic initiatives. The company expects an 8% EPS growth for 2025 compared to 2024 and aims for a 7% to 9% annual growth in both earnings and dividends. With plans to invest approximately $3.3 billion in capital for 2025, the company targets an 8% to 9% rate base growth over the long term. These elements highlight American Water’s strategic focus on infrastructure investment, regulatory progress, and sustainable shareholder returns.
In summary, American Water Works’ earnings call presented a positive outlook with strong earnings growth and a significant dividend increase, despite facing challenges like increased operating costs. The company’s strategic focus on infrastructure investment and regulatory progress positions it well for sustainable growth and shareholder returns.