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American Water Works Company, Inc. (AWK)·Q2 2025 Earnings Summary

Executive Summary

  • Solid quarter with regulated-driven top-line growth, but mixed print: revenue beat, EPS and EBITDA slightly below consensus; FY25 EPS guidance narrowed to the top half ($5.70–$5.75) on weather-normalized basis, affirming LT 7–9% EPS/dividend CAGR and 8–9% rate base growth .
  • Q2 revenue rose 11.1% YoY to $1.276B and EPS increased to $1.48; weather was a ~$0.06 EPS headwind vs prior year, with wet conditions in 2Q25 and dry/warm in 2Q24 .
  • Guidance confidence underpinned by rate execution, stronger customer usage, and continued 2025 rate increases; capex on track ($1.3B 1H, ~$3.3B FY) and ~87k customer connections under agreement including Nexus Water Group in eight states .
  • Potential catalysts: constructive rate outcomes (e.g., CA decoupling bill progress), steady M&A close cadence, financing execution (H2’25 ~$1B debt; equity expected 2026 via forward structure announced subsequently) .

What Went Well and What Went Wrong

What Went Well

  • Regulated revenue growth and acquisition contribution drove double-digit top-line growth; rate execution remained a strength across multiple states .
  • Management narrowed FY25 EPS guidance to the top half ($5.70–$5.75) on a weather-normalized basis, citing stronger usage and ongoing rate increases through Q3 as supports .
  • Strategic M&A momentum: announced agreement to acquire Nexus systems (~47k connections) and ~87k total connections under agreement platform-wide; management expects benefits from scale and in-state expansion .

Selected quotes

  • “We now expect to achieve the top half of our initial EPS guidance range for 2025, which we’ve narrowed to $5.70 to $5.75 per share.”
  • “We are continuing to build momentum with our business development platform, with 87,000 customer connections under agreement totaling over $500 million.”
  • “We expect the second half of 2025 to deliver financial results to achieve this narrowed guidance range.”

What Went Wrong

  • Weather headwinds (~$0.06 EPS adverse YoY) muted otherwise stronger underlying performance; 2Q25 wet weather and 2Q24 dry/warm compare weighed on YoY .
  • O&M, D&A, and financing costs rose as expected to support capital plan, compressing flow-through vs rate increases; O&M +$83M YoY in Q2 and D&A +$28M .
  • Against consensus, EPS and EBITDA came in slightly below while revenue exceeded, highlighting cost absorption and weather normalization effects (see Estimates Context) *.

Financial Results

P&L trend (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($MM)$1,201 $1,142 $1,276
Operating Income ($MM)$400 $371 $489
Net Income ($MM)$239 $205 $289
Diluted EPS ($)$1.22 $1.05 $1.48
EBITDA ($MM)$607 (calc: OI+D&A) $591*$714*
  • Note: EBITDA for Q1 and Q2 denote S&P Global actuals via estimates tool; Q4 computed from press release OI + D&A. Values with asterisk are from S&P Global data.

YoY quarterly compare

MetricQ2 2024Q2 2025
Revenue ($MM)$1,149 $1,276
Operating Income ($MM)$449 $489
Net Income ($MM)$277 $289
Diluted EPS ($)$1.42 $1.48

Segment snapshot (net income)

Segment Net Income ($MM)Q4 2024Q1 2025Q2 2025
Regulated Businesses$250 $201 $288

KPIs and balance sheet highlights

KPIQ2 2025
Capital invested YTD$1.3B through 6/30/25
FY2025 Capex Plan~$3.3B on track
Authorized annualized revenues YTD$270MM since 1/1/25
Customer connections under agreement~87,000 (incl. Nexus ~47k)
Dividend (declared 7/30)$0.8275 per share (payable 9/3/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (weather-normalized)FY 2025$5.65–$5.75 (Apr 30) $5.70–$5.75 (Jul 30) Raised at low end / narrowed
Dividend growth targetLT7–9% affirmed 7–9% affirmed Maintained
EPS growth targetLT7–9% affirmed 7–9% affirmed Maintained
Rate base growthLT8–9% affirmed 8–9% affirmed Maintained
2025 CapexFY 2025~$3.3B on track ~$3.3B on track Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Regulatory executionConstructive outcomes in IL, CA partial decoupling; MO case advancing; legislative wins in MO (future test year), IN, VA Continued progress: IA/HI orders; active cases in WV, KY, CA; decoupling bill moving in CA legislature Improving
Usage/weather2024 benefitted from dry weather; usage stabilizing, slight declines plateauing Stronger usage cited as driver for narrowing guidance despite unfavorable weather YoY Mixed: usage +, weather −
Capital plan~$3.3B 2024, target ~$3.3B 2025; Q1 capex $518MM 1H capex $1.3B; FY ~$3.3B on track Steady
M&A / FMV PA13 systems in 2024; building BD capabilities; PA FMV framework evolving Nexus (~47k) plus ~87k under agreement total; renewed PA activity; pipeline broad-based Accelerating
FinancingAffirmed plan: $800MM 5.25% notes in Feb; equity in 2026/2029 H2’25 ~$1B debt planned; equity plan unchanged (considering forward issuance structure in 2026) On plan
CA decouplingPartial mechanism approved; pursuing full decoupling Decoupling bill advancing (Senate passed; to Assembly then Governor) Progressing

Management Commentary

  • “We delivered solid financial results… we now expect to achieve the top half of our initial EPS guidance range for 2025… narrowed to $5.70 to $5.75 per share.” — John Griffith, CEO
  • “Weather… was unfavorable by an estimated $0.06 per share year over year… O&M higher by $0.17, depreciation +$0.10, financing +$0.08 per share, as expected to support investment growth.” — David Bowler, CFO
  • “We… have about 87,000 customer connections under agreement… Nexus [~47,000 connections]… supports our long-term growth target of 2% for customer additions.” — Cheryl Norton, COO
  • “Our total debt-to-capital… was 58%, within our target of <60%… 2025 plan includes another long-term debt issuance of roughly $1 billion in the second half.” — David Bowler, CFO

Q&A Highlights

  • Pennsylvania/FMVs: Management sees renewed PA activity; deals are long-lead, mixed FMV/traditional; new guidelines should smooth and accelerate closes .
  • Nexus acquisition: Expected to integrate without diluting profitability; expands in-state footprints and supports consolidation strategy .
  • California decoupling: Bill designed to close gaps; passed appropriations, proceeding to full legislature then Governor’s desk .
  • Financing cadence: Open to structures; current plan is to issue equity in 2026; H2’25 ~$1B long-term debt expected; forward issuance considered by peers acknowledged .
  • Guidance drivers: Stronger usage and ongoing rate increases underpin narrowed FY25 EPS range; no incremental 2026 implication beyond described drivers .

Estimates Context

Actual vs S&P Global consensus (Q2 2025):

MetricActualConsensusResult
Revenue ($MM)$1,276 $1,228*Beat
Diluted EPS ($)$1.48 $1.53*Miss
EBITDA ($MM)$714*$765*Miss
  • FY25 EPS consensus: $5.73* vs company guidance $5.70–$5.75 (weather-normalized); guidance midpoint broadly aligns with consensus .
  • Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed print: revenue beat but modest EPS/EBITDA misses; narrowing FY25 guidance to top half signals confidence in second-half execution and rate traction despite weather .
  • Regulatory momentum and legislative wins (MO future test year, CA decoupling progress) support earned returns/lag mitigation; monitor CA bill passage and upcoming rate implementations .
  • M&A pipeline remains active (Nexus + broad-based municipal pipeline, renewed PA FMV activity), supporting 2% customer growth and scale efficiencies; closing cadence and regulatory cost recovery remain execution focal points .
  • Capital plan intact ($3.3B FY25; $1.3B 1H invested) with cost discipline amid higher O&M/D&A/interest; dividend growth sustained with quarterly dividend at $0.8275 .
  • Financing path: H2’25 ~$1B debt and 2026 equity issuance plan remain on track; later-forward structure helps align issuance with investment pacing and balance sheet targets .
  • Near-term catalysts: CA decoupling adoption, rate case outcomes (WV, KY, CA), acquisition approvals/closings, and clarity on weather/usage trajectory through 2H.

Appendix: Additional details and sources

  • Q2 2025 press release (8‑K Item 2.02, Exhibit 99.1): revenue, EPS, segment, capex, guidance .
  • Q2 2025 earnings call transcript: guidance rationale, regulatory and financing updates, Q&A themes .
  • Prior quarters for trend: Q1 2025 8‑K/PR ; Q4 2024 8‑K/PR .
  • Dividend announcement (7/30/25) .
  • S&P Global estimates and actuals (consensus): EPS, revenue, EBITDA as marked with *; Values retrieved from S&P Global.