Q2 2024 Summary
Published Jan 6, 2025, 8:15 PM UTC- American Water Works has raised its 2024 EPS guidance to $5.25 to $5.30, achieving 8.5% EPS growth at the new midpoint .
- Lower-than-expected declines in customer usage have significantly contributed to the increased earnings guidance .
- The company continues strong growth through acquisitions, with 59,000 customer connections and $483 million under agreement , and remains confident in its acquisition pipeline across multiple states, including Pennsylvania .
- Potential regulatory challenges in Pennsylvania may impact American Water Works' capital investments and M&A growth plans in the state. The company acknowledges that there are legislative changes and multiple parties with differing opinions, which could affect how transactions play out before the commission.
- Delay and uncertainty surrounding the legal challenge to the Butler Area Sewer Authority (BASA) acquisition could hinder growth. The company is awaiting a decision from the Pennsylvania Commonwealth Court with no clear timeline on when it will be resolved.
- Uncertainty regarding the timing and amount of PFAS litigation settlements may impact financial outcomes. The company has submitted all required data but does not know when the payout calculations will be completed or when the proceeds will be received.
-
Impact of Low ROE in Pennsylvania
Q: How does the low ROE in Pennsylvania affect your capital plans?
A: Despite the low ROE result in Pennsylvania, we don't expect our total capital plans to change at all. We'll evaluate how we allocate capital to Pennsylvania relative to other states, balancing shareholder expectations and investment returns. The need for infrastructure investment and resiliency improvements remains across our entire territory. -
M&A Strategy in Pennsylvania
Q: Will the low ROE impact your M&A activity in Pennsylvania?
A: Our approach to acquisitions in Pennsylvania remains unchanged. We have a strong pipeline and continue to identify opportunities without slowing our pace. While the environment is challenging due to fair market value considerations and commission processes, we believe the new guidelines are helpful . -
EPS Growth Outlook
Q: Does the low ROE affect your 7–9% EPS growth target?
A: We maintain our 7–9% long-term EPS growth expectation. The low ROE in Pennsylvania doesn't impact this target, and we've reaffirmed our long-term growth. We're making significant investments across all states, with other states gaining ground in rate base size. -
Customer Usage Trends
Q: How did customer usage affect your guidance?
A: We've observed less decline in customer usage than anticipated, which contributed to improved results. This is a significant driver for narrowing our guidance range and increasing the lower end . The impact amounts to a few cents in EPS. -
Pending Legal Challenge on Butler
Q: What's the status of the legal challenge related to Butler?
A: The legal challenge is in court, and we're waiting for the Commonwealth Court's decision. We don't have a definitive timeline, as there's no precedent to predict timing. -
Towamencin Deal Update
Q: What's the latest on the Towamencin acquisition?
A: We're moving forward with the approval process and plan to file with the PUC. The deal does not need to be recut despite fair market value revisions. -
Financing Impact on Guidance
Q: How does financing affect your guidance?
A: The financing impact relates to the timing of financings we've completed, including the convertible issued last June and straight debt this year. The delayed closing of the BASA acquisition also contributes slightly . -
MSG and Other Headwinds
Q: What causes the MSG and other headwinds in 2024?
A: The headwinds are due to a collection of smaller, one-off items and are not ongoing issues with MSG. -
PFAS Litigation Proceeds
Q: Any updates on PFAS litigation proceeds?
A: We've submitted all required data to determine the payout. We're waiting for calculations to be completed, but the timing is uncertain.