Essential Utilities (WTRG) AI Stock Analysis

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Essential Utilities

(NYSE:WTRG)

Rating:73Outperform

Price Target:

$43.00

▲(10.88% Upside)

Essential Utilities showcases strong earnings growth and robust operational performance, supported by strategic infrastructure investments. While financial performance remains strong, high leverage and negative cash flow warrant caution. The stock's technical indicators suggest neutral momentum, and valuation metrics are average, making the stock a moderate opportunity with some risks.

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

$10.88B

Dividend Yield3.4%

Average Volume (3M)1.82M

Price to Earnings (P/E)16.6

Beta (1Y)0.12

Revenue Growth20.70%

EPS Growth14.59%

CountryUS

Employees3,291

SectorUtilities

Sector Strength87

IndustryRegulated Water

Share Statistics

EPS (TTM)0.38

Shares Outstanding280,468,660

10 Day Avg. Volume2,241,343

30 Day Avg. Volume1,818,488

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)0.00

Price to Sales (P/S)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.67

Enterprise Value/Revenue8.06

Enterprise Value/Gross Profit13.61

Enterprise Value/Ebitda14.31

Forecast

1Y Price Target

$43.67

Price Target Upside12.61% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

Essential Utilities Business Overview & Revenue Model

Company DescriptionEssential Utilities Inc. operates as a utility holding company, primarily serving the water and natural gas sectors in the United States. The company, through its subsidiaries, provides essential water and wastewater services to residential, commercial, and industrial customers. It also offers natural gas distribution services, ensuring reliable access to these vital resources while focusing on sustainability and infrastructure improvement.

How the Company Makes MoneyEssential Utilities generates revenue primarily through the sale of water and natural gas services to its customers. The company earns money by charging customers for the consumption of water and natural gas, which is regulated by state public utility commissions. Key revenue streams include monthly billing for residential and commercial services, as well as capital recovery through infrastructure investments. Additionally, Essential Utilities benefits from rate increases approved by regulatory bodies, which allow the company to recoup costs associated with maintaining and upgrading its systems. Significant partnerships with local governments and municipalities also contribute to its earnings, as these agreements often include long-term contracts for service provision.

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:Jul 31, 2025

(Q2-2025)

% Change Since: 6.30%|

Next Earnings Date:Nov 10, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance with significant growth in earnings and revenue, supported by successful operational execution and strategic infrastructure investments. The company also demonstrated a commitment to community engagement and environmental responsibility. However, challenges such as weather impacts on water volumes and increased operating expenses, coupled with macroeconomic factors like interest rates and inflation, were noted as concerns.

Q2-2025 Updates

Positive Updates

Significant Earnings Growth

GAAP earnings per share increased by 35% compared to the same quarter last year, reaching $0.38. The company expects to achieve GAAP earnings per share above the guidance range of $2.07 to $2.11 for 2025.

Robust Revenue Increase

Revenues rose by 18.5%, largely driven by favorable rate case outcomes in Pennsylvania and increased gas volumes. Total revenue for the quarter was $514.9 million, up from $434.4 million a year ago.

Strong Operational Performance

Both Water and Gas divisions performed well, with the gas business reporting a net income of $17.5 million for the quarter.

Infrastructure Investment Plans

The company reaffirmed its capital investment plans with a target of approximately $1.4 billion in infrastructure investment for 2025, with $613 million already deployed.

Dividend Increase

The Board of Directors approved a 5.25% increase in the dividend, marking over 30 consecutive years of dividend growth.

Ongoing Community Engagement

The company was recognized as one of Greater Philadelphia's most community-minded businesses and concluded its fourth annual Essential Earth Day campaign.

PFAS Mitigation Efforts

The company has mitigated over 50 of its 300-plus sites for PFAS and signed a distribution agreement for its PFAS Guard solution, generating significant interest.

Negative Updates

Weather Impact on Water Volumes

Decreased water consumption due to wet weather led to a $2.6 million reduction in revenue from lower water volumes.

Higher Operating Expenses

O&M expenses increased by 4.2% year-over-year, driven by higher employee-related costs, increased bad debt expense, and rising legal expenses.

Interest Rate and Inflation Challenges

Higher than expected interest rates and continued inflation impacted areas such as chemical expenses, posing ongoing challenges.

Company Guidance

During the Essential Q2 2025 earnings call, the company reported a strong performance with a GAAP earnings per share of $0.38, a 35% increase from the previous year. The company expects to exceed its full-year GAAP earnings per share guidance range of $2.07 to $2.11, driven by nonrecurring benefits and strong performances in both its Water and Gas segments. The company reaffirmed its capital investment plans with a target of $1.4 billion for 2025, having already invested $613 million by June 30. Additionally, the company anticipates a combined utility rate base growth of 8% annually, with the Water segment expected to grow by 6% and the Natural Gas segment by 11%. The dividend was increased by 5.25%, marking over 30 years of consecutive growth. The company also highlighted its ongoing infrastructure investments, including its PFAS mitigation efforts and its growing presence in Texas, where it has seen significant customer growth.

Essential Utilities Financial Statement Overview

Summary

Essential Utilities demonstrates strong growth and profitability with robust revenue increases and efficient operations. However, high leverage and negative Free Cash Flow present potential risks.

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.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
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
EBITDA	1.27B	1.25B	1.06B	1.00B	908.35M	710.47M
Net Income	613.33M	595.31M	498.23M	465.24M	431.61M	284.85M
Balance Sheet
Total Assets	18.33B	18.03B	16.84B	15.72B	14.66B	13.71B
Cash, Cash Equivalents and Short-Term Investments	20.78M	9.16M	4.61M	11.40M	10.57M	4.83M
Total Debt	7.78B	7.73B	7.09B	6.84B	6.02B	5.73B
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

Positive

Last Price38.78

Price Trends

50DMA

37.29

Positive

100DMA

38.06

Positive

200DMA

37.31

Positive

Market Momentum

MACD

0.33

Negative

RSI

64.76

Neutral

STOCH

81.52

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WTRG, the sentiment is Positive. The current price of 38.78 is above the 20-day moving average (MA) of 37.41, above the 50-day MA of 37.29, and above the 200-day MA of 37.31, indicating a bullish trend. The MACD of 0.33 indicates Negative momentum. The RSI at 64.76 is Neutral, neither overbought nor oversold. The STOCH value of 81.52 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (67)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SBS	76 Outperform	$15.53B	8.47	30.12%	2.40%	30.74%	143.94%
WTRG	73 Outperform	$10.88B	16.59	10.02%	3.40%	20.70%	14.59%
AWK	71 Outperform	$28.72B	25.58	10.40%	2.22%	13.37%	13.29%
CWT	68 Neutral	$2.78B	20.41	8.49%	2.61%	0.62%	-24.24%
HTO	68 Neutral	$1.77B	16.39	7.50%	1.67%	12.40%	11.98%
Sector *	67 Neutral	$17.90B	18.84	6.87%	3.40%	7.32%	12.41%
AWR	67 Neutral	$2.93B	23.36	13.77%	2.44%	8.55%	13.57%

* Utilities Sector Average

Performance Comparison

WTRG

Essential Utilities

38.78

0.66

1.73%

AWR

American States Water

76.21

-4.13

-5.14%

AWK

American Water

143.73

5.36

3.87%

CWT

California Water Service

46.85

-4.98

-9.61%

SBS

Companhia De Saneamento

22.73

4.49

24.62%

HTO

H2O America

50.02

-7.24

-12.64%

Essential Utilities Corporate Events

Private Placements and Financing

Essential Utilities Issues $500M Senior Notes Offering

Neutral

Aug 7, 2025

On August 7, 2025, Essential Utilities, Inc. issued $500 million in 5.250% Senior Notes due 2035, under an indenture agreement with U.S. Bank Trust Company, National Association. The notes, which will mature on August 15, 2035, were part of a registered public offering and include terms for early redemption and events of default. The offering, closed on the same date, was underwritten by BofA Securities, Wells Fargo Securities, and Huntington Securities, with the company agreeing to indemnify the underwriters against certain liabilities.

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.

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.Date of analysis: Aug 02, 2025