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Essential Utilities, Inc. (WTRG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a clean beat: Revenue $514.9M vs S&P Global consensus $467.2M (+10.2%), EPS $0.38 vs $0.298 (+27%); both divisions “firing on all cylinders” with rates and purchased gas costs driving topline . Estimates retrieved from S&P Global.*
  • Management now expects full-year GAAP EPS to land above prior $2.07–$2.11 guidance due to non-recurring benefits, while reaffirming long-term targets and capex plans ($1.4–$1.5B for 2025; $7.8B through 2029) .
  • Dividend increased 5.25% to $0.3426 per share; H1 capex reached $613M with weighted average debt cost at 4.03% and $802M of liquidity on credit lines .
  • Call commentary highlighted PFAS progress and cash inflows (received ~$7.1M YTD; targeting ~$45–$46M in 2025), regulatory momentum, and emerging data center opportunities in Pennsylvania as potential medium-term catalysts .

What Went Well and What Went Wrong

What Went Well

  • Broad-based execution: “both our water and gas divisions firing on all cylinders,” with GAAP EPS up 35% YoY to $0.38 and revenue up 18.5% YoY to $514.9M on rate awards and purchased gas costs .
  • Water and gas segment growth: Water revenue rose 9.9% YoY to $332.3M; Gas revenue rose 38.3% YoY to $177.3M, supported by rate/surcharge actions and commodity pass-throughs .
  • Strategic positioning: CEO spotlighted hydrogen technology pilot and active discussions with hyperscalers for data centers; H1 capex $613M keeps 2025 investment on track .

What Went Wrong

  • Weather and volume headwinds: Lower water volumes due to wet weather offset some gains; management noted wet summer impacting Q2 and early Q3 .
  • Cost pressures: O&M up to $148.5M (+4.2% YoY) on employee-related costs, bad debt, materials; interest expense increased to $79.8M, reflecting rate environment .
  • Inflation persists in select inputs (e.g., chemicals), and interest rates remain higher than expected; management flagged these as continuing headwinds .

Financial Results

Consolidated P&L vs prior year and prior quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$434.4 $783.6 $514.9
Operating Income ($USD Millions)$145.3 $338.9 $185.3
Net Income ($USD Millions)$75.4 $283.8 $107.8
Diluted EPS ($)$0.28 $1.03 $0.38

Margins (%)

MetricQ2 2024Q1 2025Q2 2025
EBIT Margin %33.5%*42.5%*35.9%*
Net Income Margin %17.4%*36.2%*20.9%*

Values retrieved from S&P Global.*

Segment Revenue Breakdown

SegmentQ2 2024 ($M)Q2 2025 ($M)
Regulated Water$302.5 $332.3
Regulated Natural Gas$128.2 $177.3

KPIs and Balance Sheet Highlights

KPIQ2 2025
Capex (H1 2025)$613M
2025E Capex Plan$1.4–$1.5B
Long-term Debt Cost (Wtd Avg Fixed)4.03%
Credit Lines Available$802M
Dividend (Declared 7/30/25)$0.3426 per share (+5.25%)
H1 Net Income$391.6M; EPS $1.41
ATM Equity Issuance YTD~$210M
PFAS Proceeds Received (YTD)~$7.1M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2025$2.07–$2.11 (affirmed in Q1) Above $2.11 due to non-recurring benefits Raised
Regulated Infrastructure InvestmentFY 2025$1.4–$1.5B $1.4–$1.5B Maintained
Regulated Infrastructure Investment2025–2029~$7.8B total ~$7.8B total Maintained
Rate Base CAGR (Water)Through 2029~6% (excl. DELCORA; includes scheduled 2025 closes) ~6% (same exclusions) Maintained
Rate Base CAGR (Gas)Through 2029~11% ~11% Maintained
Combined Rate Base CAGRThrough 2029>8% >8% Maintained
Equity via ATMThrough 2027~$315M in 2025; ongoing ATM use ~$315M in 2025; issued ~$210M YTD Maintained/Update on progress
Emissions ReductionBy 2035Reduce Scope 1 & 2 by 60% Reduce Scope 1 & 2 by 60% Maintained
Water Customer GrowthLong term2–3% AAGR (acq + organic) 2–3% AAGR Maintained
Gas Customer Base2025Stable Stable Maintained
DELCORA in GuidanceN/AExcluded Excluded Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/Technology & HydrogenPilot deployments (solid-state gas meters), continued infrastructure tech focus Hydrogen pilot showcased; hyperscaler data center discussions in PA Increasing emphasis
Supply Chain & InflationManaged O&M growth; some input pressures Inflation persists in chemicals; overall cost discipline maintained Stable headwinds
Macro & WeatherWeather normalization mechanism helpful in Q4 Wet summer dampened water volumes; early Q3 impact Weather variability continued
Regulatory/LegalPA PUC wins; Aqua PA rate case settlement; active cases/pending surcharges Constructive dialogues with OCA/Small Business Advocate; KY gas rate increase; pending NC/TX/OH/VA cases Constructively improving
PFAS Program & CashSignificant PFAS capex planned through 2029 YTD PFAS proceeds ~$7.1M; full-year ~$45–$46M expected; proprietary PFASGuard system scaling Accelerating execution
M&A Pipeline~400k customer equivalents pipeline; multiple signed deals; DELCORA excluded Beaver Falls closed ($37.75M); four signed deals pending; pipeline ~400k customers Steady progress

Management Commentary

  • “We delivered strong second-quarter results… both our water and gas divisions are firing on all cylinders.” – CEO Christopher Franklin .
  • “We expect to achieve GAAP EPS above our guidance range of $2.07 to $2.11, largely due to several non-recurring benefits.” – CFO Dan Schuller .
  • “We are tremendously proud of our industry-leading PFAS commitment… over 50 sites mitigated and ~50 under construction; PFASGuard generating strong interest.” – Aqua President Colleen Arnold .

Q&A Highlights

  • EPS cadence and full-year outlook: Non-recurring positives (tax items, regulatory reserve reversal, insurance proceeds) offset weather and higher interest; GAAP EPS expected above guidance .
  • Cash flow and leverage: Targeting FFO/debt above the 12% downgrade threshold (~12.2%); aiming to remove Moody’s negative outlook in early 2026 after FY25 results; PFAS proceeds ~$7.1M YTD and ~$45–$46M expected in 2025 .
  • Regulatory tone in Pennsylvania: Constructive engagement with OCA and Small Business Advocate; openness to settlement dialogue .
  • Tax rate modelling: 2025 low single-digit benefit; 2026 low single-digit expense; crossover at year-end .
  • Hyperscalers/data centers: Quick-turn builds in PA; potential mix of regulated and unregulated opportunities .

Estimates Context

  • Q2 2025 vs Consensus: EPS $0.38 vs $0.298 (beat); Revenue $514.9M vs $467.2M (beat). EPS # of estimates: 6; Revenue # of estimates: 2. Estimates retrieved from S&P Global.*
  • Q1 2025 vs Consensus: EPS $1.03 vs $0.798 (beat); Revenue $783.6M vs $690.0M (beat). Estimates retrieved from S&P Global.*
MetricQ2 2025 ActualQ2 2025 Consensus*Surprise
EPS ($)$0.38 0.29833*+$0.0817
Revenue ($M)$514.9 467.2*+$47.7

Values retrieved from S&P Global.*

Adjustment likely: Consensus models should incorporate stronger rate recovery, purchased gas dynamics, and non-recurring tax/regulatory benefits noted by management; water volume assumptions may need to reflect wetter conditions and sequential impacts .

Key Takeaways for Investors

  • Quality beat with conservative tone: Strong rate-driven revenue and EPS beat, but management underscores weather, interest, and input cost headwinds; still raising GAAP EPS outlook above the prior range .
  • Defensive growth profile: Reaffirmed $1.4–$1.5B capex for 2025 and $7.8B through 2029, underpinned by PFAS remediation and pipe replacement; rate base CAGR targets intact (water ~6%, gas ~11%, combined >8%) .
  • Regulatory momentum: Recent KY gas rate win and constructive PA advocate dialogue support recovery of invested capital; multiple pending cases (NC, TX, OH, VA) represent near-term earnings visibility .
  • Cash and leverage watch: PFAS inflows bolster cash; management targeting FFO/debt >12% to improve ratings outlook into 2026—monitor execution against this threshold .
  • Emerging catalysts: PA data center buildouts and hydrogen pilot could create incremental demand and potential unregulated opportunities; acquisition pipeline (~400k customers) and Beaver Falls close strengthen growth optionality .
  • Dividend durability: 5.25% increase reflects confidence amid ongoing investment cycle and stable payout philosophy .
  • Model updates: Raise 2025 GAAP EPS above $2.11, refine quarterly cadence for weather volume impacts, and incorporate PFAS proceeds/tax benefits while keeping higher interest costs and chemical inflation in view .

Notes: Estimates retrieved from S&P Global.*