Essential Utilities (WTRG) AI Stock Analysis

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Essential Utilities

(NYSE:WTRG)

Rating:75Outperform

Price Target:

$43.00

▲(12.86%Upside)

Essential Utilities receives a solid overall score of 75, driven primarily by its strong financial performance and positive earnings call insights. The company's robust profitability and strategic investments support long-term growth prospects. However, technical indicators suggest short-term caution, and valuation metrics indicate reasonable pricing with a decent dividend yield. The need for further equity issuance and regulatory challenges slightly temper the outlook.

Positive Factors

Earnings

WTRG outperformed expectations on both revenue and profit, demonstrating strong operational execution.

Financial Performance

The re-initiation of long-term EPS guidance and strong Q3 performance increases confidence in Essential Utilities' multi-year outlook.

Regulatory Approval

The approval of the gas business rate case by the Pennsylvania PUC supports revenue growth, despite an appeal that is not considered a material concern.

Negative Factors

Financial Flexibility

Equity financing came in weaker than expected, with new ATM guidance set at a cumulative $350M for 2024-2025, potentially affecting financial flexibility.

Growth Prospects

The management trimmed rate base guidance for the water segment, which could impact future growth prospects.

Regulatory Challenges

Court proceedings related to the DELCORA acquisition are beyond WTRG's control, leading to uncertainty in EPS and capex guidance.

Essential Utilities (WTRG) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$10.73B

Dividend Yield3.4%

Average Volume (3M)1.53M

Price to Earnings (P/E)17.2

Beta (1Y)0.20

Revenue Growth16.41%

EPS Growth5.65%

CountryUS

Employees3,291

SectorUtilities

Sector Strength78

IndustryRegulated Water

Share Statistics

EPS (TTM)1.03

Shares Outstanding280,337,620

10 Day Avg. Volume1,986,375

30 Day Avg. Volume1,529,455

Financial Highlights & Ratios

PEG Ratio5.02

Price to Book (P/B)2.33

Price to Sales (P/S)0.00

P/FCF Ratio-27.07

Enterprise Value/Market Cap1.80

Enterprise Value/Revenue2.34

Enterprise Value/Gross Profit14.43

Enterprise Value/Ebitda3.98

Forecast

1Y Price Target

$44.67

Price Target Upside17.24% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Essential Utilities Business Overview & Revenue Model

Company DescriptionEssential Utilities, Inc. (WTRG) is a publicly traded utility company based in the United States, primarily engaged in providing water, wastewater, and natural gas services. Operating through its subsidiaries, the company serves millions of customers across multiple states, with a strong presence in both urban and rural areas. Essential Utilities focuses on delivering reliable, safe, and sustainable utility services, emphasizing infrastructure investment and environmental stewardship.

How the Company Makes MoneyEssential Utilities generates revenue primarily through the provision of regulated water and wastewater services, as well as natural gas distribution. The company's key revenue streams include customer billing for water usage, wastewater treatment services, and natural gas consumption. As a regulated utility, Essential Utilities operates under state-regulated rate structures, which provide a predictable income stream. The company may also engage in infrastructure improvement projects, which can be funded through rate increases approved by regulatory agencies. Additionally, Essential Utilities may form strategic partnerships or pursue acquisitions to expand its service areas and customer base, thereby enhancing its revenue potential.

Essential Utilities Key Performance Indicators (KPIs)

Any

Operating Expense Breakdown

Operating Expense Breakdown
Details core costs like maintenance, labor, and infrastructure, offering insight into how efficiently Essential Utilities manages its resources and where it’s prioritizing investment to ensure reliable water and wastewater services.

Chart InsightsEssential Utilities is experiencing a steady rise in operating expenses, notably in depreciation and operations and maintenance costs. The increase in purchased gas expenses reflects higher gas volumes, aligning with the company's reported revenue growth. Despite these rising costs, the company remains committed to substantial infrastructure investments, projected at $1.4 billion to $1.5 billion in 2025. However, the need for additional equity issuance and regulatory challenges in Pennsylvania could pose financial pressures, potentially impacting future expense management and growth strategies.

Data provided by:

Main Street Data

Essential Utilities Earnings Call Summary

Earnings Call Date:May 12, 2025

(Q1-2025)

% Change Since: -5.74%|

Next Earnings Date:Aug 11, 2025

Earnings Call Sentiment Positive

The earnings call presented strong financial performance and operational achievements, with significant revenue growth and strategic infrastructure investments. However, the need for further equity issuance and regulatory challenges in Pennsylvania moderate the positive outlook.

Q1-2025 Updates

Positive Updates

Record Earnings Per Share

Essential Utilities reported strong results with a GAAP earnings per share of $3, marking a 6% increase over the previous year's quarter.

Infrastructure Investment Commitment

Reaffirmed plans to invest between $1.4 billion and $1.5 billion in infrastructure improvements for 2025, with $270.5 million already spent.

Water Quality Compliance

Achieved a water quality compliance rate of 99.8%, meeting state and federal regulations over the past 12 months.

Regulatory Approvals and Adjustments

Positive developments in Texas and Ohio with legislative changes favoring utility operations and rate case timelines.

Revenue Growth

Quarterly revenue increased by 28% from $612.1 million to $783.6 million, driven by regulatory recoveries and higher gas volumes.

Environmental Recognition

Named to USA TODAY's list of climate leaders for the third consecutive year, recognizing the company's commitment to environmental stewardship.

Negative Updates

Equity Issuance Required

Approximately $100 million in equity still needs to be raised to meet 2025 financial requirements, indicating financial pressure.

PFAS Mitigation Costs

Continued high costs related to PFAS mitigation, with $450 million projected to be spent by 2028.

Adverse ALJ Recommendation

Faced a negative recommendation from an administrative law judge in Pennsylvania regarding the acquisition of Beaver Falls, despite a settlement agreement.

Company Guidance

During the Essential Utilities First Quarter 2025 earnings call, the company provided detailed guidance, reaffirming its 2025 earnings per share (EPS) guidance range of $2.07 to $2.11, an increase from last year's $1.97 per share on a non-GAAP basis. The company also highlighted a 6% increase in GAAP earnings per share to $3, compared to the previous year. Essential Utilities plans to invest between $1.4 billion and $1.5 billion in infrastructure improvements in 2025, having already invested $270.5 million by March 31. The company has raised approximately $210 million through its ATM program to support growth and meet credit metrics. Additionally, Essential Utilities maintains high water quality compliance at 99.8% and plans to achieve full compliance with PFOS regulations by 2028, with a targeted capital spend of $450 million. The company also expects approximately $100 million in proceeds from polluter settlements. In terms of financial growth, Essential Utilities aims for a 5% to 7% annual growth rate in earnings per share, supported by consistent dividend growth averaging 7% since 2015.

Essential Utilities Financial Statement Overview

Summary

Essential Utilities demonstrates strong growth and profitability with robust revenue increases and efficient operations. While the balance sheet indicates a healthy equity position, high leverage and negative Free Cash Flow present potential risks. Overall, the company is well-positioned for growth, but careful management of capital expenditures and debt levels is crucial for financial stability.

Income Statement

Very Positive

Essential Utilities shows strong financial performance with consistent revenue growth and improving margins. The TTM (Trailing-Twelve-Months) Gross Profit Margin stands at 59.24%, and Net Profit Margin at 27.16%, reflecting efficient cost management. Revenue has grown by 8.21% from the previous annual period, indicating a positive growth trajectory. The EBIT and EBITDA Margins are robust at 38.36% and 56.34%, respectively, showcasing operational efficiency. However, some volatility in revenue from 2022 to 2023 warrants attention.

Balance Sheet

Positive

The balance sheet represents a stable financial position with a Debt-to-Equity Ratio of 1.20, which is manageable within the industry context. The Return on Equity (ROE) is strong at 9.49%, demonstrating efficient use of equity capital. The Equity Ratio of 35.25% indicates a solid equity base, albeit with high leverage. The company's asset base is growing, supporting its long-term stability.

Cash Flow

Positive

Cash flow analysis shows a mixed picture with a Free Cash Flow to Net Income Ratio of -0.84 in the TTM period, indicating significant capital expenditures. Operating Cash Flow to Net Income Ratio is 1.35, suggesting good cash generation from operations. However, negative Free Cash Flow points to potential liquidity challenges if capital investments do not translate into future growth.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.26B	2.09B	2.05B	2.29B	1.88B	1.46B
	Gross Profit
1.34B	1.22B	1.13B	1.07B	987.30M	768.34M
	EBIT
865.91M	757.67M	692.10M	661.19M	602.71M	434.69M
	EBITDA
1.27B	1.25B	1.06B	1.00B	908.35M	710.47M
	Net Income Common Stockholders
613.33M	595.31M	498.23M	465.24M	431.61M	284.85M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
20.78M	9.16M	4.61M	11.40M	10.57M	4.83M
	Total Assets
18.33B	18.46B	16.84B	15.72B	14.66B	13.71B
	Total Debt
7.78B	7.73B	7.09B	6.84B	6.02B	5.73B
	Net Debt
7.76B	7.72B	7.08B	6.83B	6.01B	5.72B
	Total Liabilities
11.87B	11.83B	10.95B	10.34B	9.47B	9.02B
	Stockholders Equity
6.46B	6.20B	5.90B	5.38B	5.18B	4.68B
Cash Flow		Free Cash Flow
-518.14M	-559.40M	-265.52M	-462.46M	-375.84M	-327.62M
	Operating Cash Flow
829.15M	770.34M	933.59M	600.31M	644.68M	508.02M
	Investing Cash Flow
-1.36B	-1.16B	-1.22B	-1.18B	-1.06B	-4.33B
	Financing Cash Flow
521.12M	397.48M	281.36M	578.83M	417.12M	1.96B

Essential Utilities Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price38.10

Price Trends

50DMA

39.11

Negative

100DMA

37.89

Positive

200DMA

37.74

Positive

Market Momentum

MACD

-0.35

Positive

RSI

45.50

Neutral

STOCH

57.69

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WTRG, the sentiment is Neutral. The current price of 38.1 is below the 20-day moving average (MA) of 38.33, below the 50-day MA of 39.11, and above the 200-day MA of 37.74, indicating a neutral trend. The MACD of -0.35 indicates Positive momentum. The RSI at 45.50 is Neutral, neither overbought nor oversold. The STOCH value of 57.69 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for WTRG.

Essential Utilities Risk Analysis

Essential Utilities disclosed 36 risk factors in its most recent earnings report. Essential Utilities reported the most risks in the "Production" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Essential Utilities Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AWK	77 Outperform	$27.55B	25.72	10.43%	2.34%	11.79%	11.69%
SBS	76 Outperform	$14.10B	7.69	28.57%	2.70%	26.64%	151.43%
WTRG	75 Outperform	$10.73B	17.17	9.78%	3.40%	16.41%	5.65%
HTO	74 Outperform	$1.86B	18.21	7.49%	3.09%	12.34%	11.78%
AWR	69 Neutral	$3.03B	24.27	13.95%	2.37%	6.79%	5.96%
Sector *	64 Neutral	$8.54B	10.40	4.24%	4.63%	4.14%	-13.05%
CWT	63 Neutral	$2.81B	20.69	8.67%	2.51%	3.83%	-8.75%

* Utilities Sector Average

Performance Comparison

WTRG

Essential Utilities

38.10

2.38

6.66%

AWR

American States Water

78.27

9.52

13.85%

AWK

American Water

140.61

15.43

12.33%

CWT

California Water Service

46.71

0.11

0.24%

SBS

Companhia De Saneamento

20.84

7.28

53.69%

HTO

H2O America

53.54

2.99

5.91%

Essential Utilities Corporate Events

Executive/Board ChangesShareholder Meetings

Essential Utilities Holds 2025 Annual Shareholders Meeting

Neutral

May 12, 2025

The 2025 Annual Meeting of Shareholders for Essential Utilities, Inc. was held virtually on May 7, 2025. During the meeting, several key decisions were made: the election of directors for one-year terms, the approval of executive compensation for 2024, and the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the 2025 fiscal year. These decisions reflect the company’s ongoing governance practices and commitment to transparency and accountability in its operations.

The most recent analyst rating on (WTRG) stock is a Buy with a $46.00 price target. To see the full list of analyst forecasts on Essential Utilities stock, see the WTRG Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.