Essential Utilities, Inc. (WTRG)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue grew 26.1% year over year to $604.4M, and diluted EPS rose to $0.67 from $0.50 in Q4 2023, driven by regulatory recoveries, purchased gas cost recovery, and higher volumes; the PA gas weather normalization mechanism helped stabilize Q4 revenues despite warmer-than-normal weather .
• Full-year GAAP EPS was $2.17, with non-GAAP adjusted EPS of $1.97 after normalizing for the ~$0.25 gain on sale and ~$0.05 net weather impact; management noted adjusted EPS was above the full-year consensus of $1.95, implying a modest beat on FY adjusted EPS .
• 2025 EPS guidance of $2.07–$2.11 and multi-year EPS CAGR of 5–7% through 2027 were reaffirmed; capex plans remain elevated at $1.4–$1.5B in 2025 and ~$7.8B through 2029, supporting ~6% water and ~11% gas rate base CAGR (combined >8%) .
• Potential medium-term catalysts include constructive PA regulatory outcomes (Aqua PA settlement; weather normalization at Peoples), continued PFAS mitigation with expected external recovery offsets, and natural gas throughput opportunities from data center development discussions in Western PA (up to 5 GW) .

What Went Well and What Went Wrong

• What Went Well

  • “Another year in a string of years” of delivering EPS in line with 5–7% growth guidance; FY 2024 GAAP EPS $2.17 and adjusted EPS ~$1.97, with O&M growth held to ~2% and the $1.3B capex plan completed on target .
  • Strong regulatory outcomes: PA Peoples Gas rate case (+$93M annualized) including weather normalization; Aqua PA settlement (+$73M annualized) approved in Feb 2025, enhancing revenue visibility and reducing weather volatility .
  • PFAS mitigation progress: ~13 sites completed in 2024, patent-pending modular approach, with ~$450M program guided net of expected lawsuit proceeds and grants; management reiterated confidence in recovery and timelines .

• What Went Wrong

  • Weather headwinds in 1H 2024 materially reduced gas volumes; while Q4 benefitted from weather normalization, the year still required non-GAAP normalization to achieve the adjusted EPS target .
  • Elevated O&M headwinds ahead (2025): purchased power resets in PJM states, PFAS-related chemicals (PAC feed), and insurance costs, tempering near-term EPS growth tailwinds from rate cases .
  • Non-unanimous appeal by the PA Office of Consumer Advocate for the Peoples rate case adds procedural uncertainty (though management expects no accounting impact and views the PUC order as sound) .

Financial Results

Notes:

• Year-over-year Q4: Revenue +26.1%, EPS +34% vs Q4 2023, helped by purchased gas cost recovery, rates/surcharges, and volume; weather normalization stabilized Q4 gas revenues .
• Sequential Q4 vs Q3: Revenue +$169.1M and EPS +$0.42, reflecting PA rate case effects and higher volumes; Q3 was depressed by lower gas volumes and timing effects (tax repair benefits in prior year) .

Segment Context (FY 2024 vs FY 2023):

KPIs and Drivers (Q4 specifics):

• Weather normalization mechanism in PA gas “worked as intended” to stabilize revenues in Q4 amid warmer-than-normal conditions .
• Q4 purchased gas expense rose to $94.5M as volumes recovered; higher depreciation and interest expenses offset part of top-line gains .
• O&M was controlled (+$6.5M YoY), consistent with long-term discipline; FY O&M up ~2% reflecting divestitures and cost management .

Estimates vs Actuals:

• SPGI consensus EPS and revenue for Q4 2024 were unavailable at time of this analysis due to S&P Global request limits; management indicated FY 2024 adjusted EPS ($1.97) was above the full-year consensus of $1.95 .
• Where estimates are needed, we anchor on S&P Global; data was unavailable for Q4 quarter comparisons.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Financially, 2024 is another year in a string of years that we have reported earnings per share in line with our 5% to 7% guidance…GAAP $2.17 per share…non-GAAP…about $1.97” .
• “One of the key accomplishments in the Peoples rate case was the establishment of weather normalization…already proven to be beneficial to both shareholders and customers” .
• “We spent about $27,000,000 in capital and completed the [PFAS] mitigation work in 13 plants…patent pending approach…also marketing to other utilities” .
• “We are in discussions with data center developers that represent up to five gigawatts of needed power generation in the Pittsburgh region…we would welcome both the increased throughput and any capital improvements” .
• “In 2025, we expect earnings per share to be between $2.07 and $2.11…compounded annual growth of EPS at a rate of 5% to 7% through 2027” .

Q&A Highlights

• Equity plan: ~$315M ATM issuance planned for 2025, after ~$36M in 2024; $1B ATM remains optionality over ~3 years depending on M&A cadence and Delcora .
• Regulatory climate: Interim consumer advocate change and constructive PA outcomes seen as reducing litigation intensity; Greenville wastewater (FMV) closed post FSIO, signaling improved certainty .
• Data centers: Scenarios range from throughput to line extensions (rate base) to potential on-site generation (non-regulated) similar to prior CHP projects; access to Marcellus/Utica gas helps cost-competitiveness .
• PFAS: ~$450M net investment guided; expected ~$100M lawsuit proceeds and pursuit of loans/grants to offset customer impact; modular, small-system focused approach may become revenue generator via technology sales .
• 2025 O&M headwinds: Purchased power resets, PFAS PAC feeding at large plants, higher insurance costs temper guidance upside despite rate case tailwinds .

Estimates Context

• Quarterly (Q4 2024): S&P Global consensus EPS and revenue were unavailable due to request limits at the time of analysis. Management indicated FY 2024 adjusted EPS ($1.97) exceeded full-year consensus of $1.95, implying a modest beat on adjusted basis .
• Implication: Street models may need to incorporate weather normalization effects, PA rate case timing, higher purchased gas recovery in Q4, and 2025 O&M headwinds (power, PFAS chemicals, insurance) .

Key Takeaways for Investors

• Q4 execution was strong: revenue +26% YoY and EPS +34% YoY with stabilization from PA weather normalization; FY adjusted EPS ~$1.97 exceeded the cited full-year consensus of $1.95, a constructive print into 2025 guidance .
• Regulatory backdrop is favorable in PA across water and gas, adding visibility to earnings and reducing volatility—key support for multiple and funding plan .
• Near-term headwinds (2025) include purchased power resets, PFAS O&M chemicals, and insurance; these are manageable but warrant conservative modeling within the $2.07–$2.11 EPS range .
• PFAS program remains a strategic and reputational positive; recovery mechanisms, lawsuits (~$100M), and grants mitigate bill impact while modular technology could create ancillary revenue opportunities .
• Potential upside optionality from data center-driven gas throughput and targeted infrastructure builds in Western PA; timing and form (regulated vs unregulated) remain uncertain but could be material over time .
• Equity issuance (~$315M in 2025) via ATM supports capex and credit metrics; watch cadence vs M&A closings and any Delcora developments for capital plan adjustments .
• Tactical angle: Near-term narrative catalysts include continued rate implementations, PFAS progress, and any data center announcements; headwinds require monitoring but are well-telegraphed by management .

Additional References:

• Q4 2024 Earnings Call Transcript –
• 8-K (Item 2.02) and Exhibit 99.1 – FY/Q4 2024 Press Release –
• Full Press Release FY/Q4 2024 (tables and reconciliation) –
• Prior quarter materials: Q3 2024 PR/call – –; Q2 2024 PR/call – –
• Dividend declaration (Dec 2024)