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American Water Works Company, Inc. (AWK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid operational performance: revenue $1.201B and EPS $1.22, up year-over-year on rate case implementation, acquisitions, and modestly favorable weather; operating income rose to $400M . Regulated Businesses’ net income increased to $250M vs. $188M in Q4 2023 .
  • 2025 EPS guidance of $5.65–$5.75 was affirmed along with 7–9% long-term EPS and dividend growth targets, and 8–9% rate base growth; guidance includes ~$0.10/share incremental interest income from the amended HOS note .
  • Capital deployment remains aggressive: $3.3B invested in 2024 (including $417M for regulated acquisitions) and long-term CapEx plans of $17–$18B (2025–2029) and $40–$42B (2025–2034) .
  • Strategic/catalyst items: CEO succession announced (Hardwick retiring May 14, 2025; Griffith to become CEO) , Missouri rate case progressing with expectations for mid-2025 rate implementation and potential settlement .
  • Estimate comparison: S&P Global Wall Street consensus for Q4 2024 EPS and revenue was unavailable due to API limits; investors should anchor to S&P Global data when accessible and note management’s emphasis to exclude ~$0.10/share HOS interest when modeling growth . Values from S&P Global were unavailable.

What Went Well and What Went Wrong

  • What Went Well
    • Authorized rate increases and infrastructure surcharges drove revenue growth; operating revenues +$132M YoY in Q4 and +$376M for 2024 .
    • Acquisition execution: 13 regulated systems closed in 2024 adding ~69,500 connections, achieving the 2% acquisition growth target; nearly 90,000 total connections added in 2024 .
    • Management tone on execution and targets remained confident: “delivered EPS growth of 8-plus percent” and affirmed long-term growth framework .
  • What Went Wrong
    • Cost pressures: O&M, production costs (purchased water, fuel, power, chemicals), general taxes and depreciation increased; interest expense +$15M in Q4 YoY .
    • Usage trends: declining usage persists, though plateauing; management still flags conservation and fixtures as ongoing headwinds .
    • California decoupling: only partial mechanism approved; company filed for rehearing to pursue full revenue stabilization .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Operating Revenues ($USD Billions)$1.032 $1.323 $1.201
Operating Income ($USD Billions)$0.299 $0.543 $0.400
Net Income ($USD Billions)$0.171 $0.350 $0.239
Diluted EPS ($USD)$0.88 $1.80 $1.22
Operating Margin (%)29.0% (299/1032) 41.0% (543/1323) 33.3% (400/1201)
Net Income Margin (%)16.6% (171/1032) 26.5% (350/1323) 19.9% (239/1201)
Weather EPS impact (Quarter)+$0.02 +$0.04 +$0.05

Segment breakdown

Segment MetricQ4 2023Q3 2024Q4 2024
Regulated Businesses Net Income ($USD Millions)$188 $356 $250

KPIs

KPIQ4 2024 / FY 2024Context
Customer connections added~90,000 FY; ~69,500 via acquisitions Achieved 2% acquisition growth target
2024 Capital investment$3.3B $417M acquisitions; infrastructure renewal focus
Authorized annualized revenues since Jan 1, 2024~$389M general rate cases; ~$113M infrastructure surcharges $283M and $90M effective in 2024; remainder in 2025
Dividend (declared Dec 6, 2024)$0.765/share payable Mar 4, 2025 Standard cadence

Note: S&P Global estimates for Q4 2024 were unavailable due to API limits; investors should use S&P Global consensus when accessible.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS ($)FY 2025$5.65–$5.75 (established Oct 30, 2024) $5.65–$5.75; includes ~$0.10/share incremental HOS interest Maintained
EPS (ex incremental HOS interest)FY 2025$5.55–$5.65 Implied similar exclusion emphasis from mgmt commentary Maintained emphasis to exclude $0.10 when modeling
Long-term EPS CAGRLT7–9% 7–9% Maintained
Dividend CAGRLT7–9% 7–9% Maintained
Rate base growthLT8–9% 8–9% Maintained
CapEx plan2025$3.3B $3.3B Maintained
CapEx plan2025–2029$17–$18B $17–$18B Maintained
CapEx plan2025–2034$40–$42B $40–$42B Maintained
Financing2025No equity; $1.5–$2.0B LT debt No equity; $1.5–$2.0B LT debt Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
PFAS/LCRI compliancePlan to invest ~$1B PFOS over time; regulatory execution across states Expect ~$1B PFOS over a decade; LCRI highlights and increased 5-year plan No change to PFOS capital plans; recent Calgon Carbon contract for supply chain security Steady execution; spend ramping
Customer usageLower-than-expected declines supported 2024 guidance narrowing Weather-normalized demand assumptions revised modestly Declines plateauing but still present; not concerning Slightly improving trajectory
Decoupling (CA)Pursuing revenue stabilization mechanism continuation; Supreme Court decision cited Partial settlement; decoupling still contested Filed motion for rehearing to seek full decoupling Active legal/regulatory effort
Acquisitions pipeline59k connections under agreement; Pennsylvania BASA pending Closed BASA ($230M), pipeline broadened to ~1.5M potential connections 13 systems closed in 2024; ~70k customers added; continued BD build-out Strengthening, broadened
Financing/equityConvert and senior notes increased LT financing costs Equity in 2026 and 2029; AMT cash taxes ~$100M/yr Hybrids not cost-effective; issue equity “when needed” Plan reiterated
CybersecurityNoted Oct 3, 2024 incident; not expected to be material Continued monitoring No incremental impacts discussed in Q4 callStable
AI/data centersNot discussedNot material to water demand broadly; power more impacted “Trickling in” only; limited water demand effect Neutral

Management Commentary

  • “We delivered 2024 financial results right in line with our expectations… EPS growth of 8-plus percent.” – John Griffith .
  • “American Water… is the only pure play, large-cap water utility in the U.S.” – M. Susan Hardwick .
  • “We expect to achieve consistent EPS growth well within the 7% to 9% range through 2029 and beyond.” – John Griffith .
  • “We have filed a motion for rehearing [in California]… exploring other avenues to ensure that customers can achieve the benefits associated with decoupling.” – David Bowler .

Q&A Highlights

  • Modeling base: Exclude ~$0.10/share incremental HOS interest from the base when thinking about 7–9% EPS growth; management will continue to break out this non-operating item .
  • Supply chain: Robust procurement across states; Calgon Carbon contract to secure PFOS-related equipment and media supply .
  • Missouri rate case: Hearings imminent; settlement discussions underway; expectation aligned with prior settled case .
  • Financing: Hybrids deemed more dilutive vs. straight equity; equity issuance timing tied to need and market conditions; no equity in 2025 .
  • Demand/AI: Data center/industrial development has limited water demand impact; early stage and not expected to materially affect water usage .

Estimates Context

  • S&P Global Q4 2024 consensus estimates for EPS and revenue were unavailable due to API limits at the time of this analysis; management affirmed 2025 EPS guidance and urged investors to exclude the ~$0.10/share incremental HOS interest when assessing underlying growth . Values from S&P Global were unavailable.

Key Takeaways for Investors

  • Rate-driven growth intact: Q4 revenue and EPS rose YoY on authorized increases and acquisitions; long-term 7–9% EPS/dividend growth reiterated .
  • Focus models on core regulated earnings: Strip out ~$0.10/share incremental HOS interest to gauge underlying EPS growth trajectory .
  • CapEx visibility supports rate base growth: $3.3B in 2024 and $17–$18B (2025–2029) underpin 8–9% rate base growth and multi-year earnings compounding .
  • Regulatory watch items: California decoupling rehearing outcome, Missouri mid-2025 rate order, and ongoing rate case cadence across four jurisdictions .
  • Acquisition flywheel: 2024 added ~69.5k connections via acquisitions; broadened pipeline and BD resourcing should sustain ~2% annual customer growth target .
  • Operating cost discipline remains essential: O&M, depreciation, taxes and financing costs are rising alongside investment; timely recovery and mechanisms mitigate lag .
  • Leadership transition: CEO succession planned for May 2025; continuity of strategy and disciplined execution likely to maintain investor confidence .

Sources: Q4 2024 8-K and press release ; Q4 2024 earnings call transcript ; Q3 2024 press release and call ; Q2 2024 press release and call .