American Water Works NYSE: AWK reported third-quarter adjusted earnings of $2.00 per share, up from $1.89 per share a year earlier, and narrowed its full-year 2026 adjusted EPS outlook to $6.07 to $6.12, representing the top half of its prior guidance range.
For the first nine months of 2026, adjusted earnings were $4.63 per share, compared with $4.40 per share in the same period of 2025. President and CEO John Griffith said the results reflected execution on the company’s operating and capital plans, including investments in infrastructure and regulated acquisitions.
American Water also initiated standalone adjusted EPS guidance for 2027 of $6.53 to $6.63 per share, which it said represents 8% growth over 2026. The company reaffirmed its long-term targets of 7% to 9% annual growth in EPS and dividends per share.
Essential Utilities merger advances
Griffith said American Water continues to expect its proposed merger with Essential Utilities to close by the end of the first quarter of 2027. The companies announced the transaction one year ago, and American Water said it has made further progress through the regulatory approval process.
The company previously received approvals in Kentucky, Ohio and Virginia. Since midyear, it reached settlements in Pennsylvania, Texas and North Carolina, while settlement discussions remain underway in New Jersey. In Illinois, an administrative law judge issued a favorable recommendation in September, and American Water expects an order soon. The federal Hart-Scott-Rodino waiting period expired in mid-August.
“We expect to capitalize on the strategic rationale and financial benefits of the merger to drive growth and value creation,” Griffith said.
Chief Financial Officer David Bowler said the company will provide combined-company guidance after the transaction closes. He noted that the timing will depend partly on the amount of Essential’s Peoples business earnings attributable to the first quarter before closing.
On Peoples, Griffith said American Water will review strategic alternatives after the merger is completed. When asked whether retaining the gas utility could be considered, he said “everything” could be on the table in a strategic review. Griffith also said American Water expects to maintain its 7% to 9% long-term EPS growth target with or without Peoples.
Rate cases and capital investment
American Water said revenue growth during the quarter was supported by newly authorized rates intended to recover infrastructure investment. The company also cited expected increases in depreciation, financing costs and taxes. Bowler said operations and maintenance costs rose modestly year over year as the company continued to focus on cost control.
In New Jersey, the company received a final order approving a $68 million annualized increase in water and wastewater revenue. The order included a 9.5% authorized return on equity and a 54% equity component, with new rates taking effect Sept. 15.
American Water has general rate cases underway in five jurisdictions. In Illinois, an administrative law judge on Oct. 23 recommended a 9.67% return on equity and a 50% equity layer. The proposed $67 million incremental revenue amount is below the company’s updated $104 million request. A final order is expected by Dec. 18, and new rates would take effect Jan. 1, 2027.
In Pennsylvania, the company filed its third long-term infrastructure improvement plan covering proposed distribution-system improvement charge investments from January 2027 through December 2031. The filing seeks to add eligible property categories for recovery through quarterly filings. American Water expects a commission decision by the end of 2027.
In California, the company filed an application related to desalination facilities under construction for customers in the Monterey area. The application raised the estimated project cost to $825 million plus allowance for funds used during construction, reflecting permitting and approval processes, legal challenges, and higher labor, construction, materials and financing costs. Bowler said the full cost is included in the company’s five- and 10-year planning forecast.
Growth investments and acquisitions
American Water invested $2.8 billion in capital projects and acquisitions through the first nine months of 2026. The investments included infrastructure renewal, resiliency improvements, water-quality projects, PFAS and lead remediation, and new systems.
The company expects to invest $4.1 billion in 2027, including acquisitions. It now expects to invest more than $20 billion through 2030 and more than $48 billion through 2035. Cheryl Norton, executive vice president and chief operating officer, said the increase in the current five-year plan primarily reflects accelerated replacement of aging underground pipe.
PFAS and lead-and-copper compliance investments remain embedded in the long-term plan at levels similar to those previously disclosed, Norton said. The company said it remains focused on balancing infrastructure needs with customer affordability, cost management and customer-assistance programs.
American Water added nearly 81,000 customer connections across 10 states through September, surpassing its 2% customer-growth target with one quarter remaining in the year. The additions included the Nexus Water Group systems acquired in June and eight other systems.
In October, the company closed on water and wastewater systems in Neosho, Missouri, adding 5,900 connections for each service. American Water plans to invest $35 million over five years to improve water quality and wastewater treatment in the system.
As of Sept. 30, the company had about 36,000 customer connections under agreement across five states, representing $182 million in potential acquisitions.
Financing outlook
American Water completed a $500 million long-term debt issuance on Sept. 14 at a 5.55% rate. Its debt-to-capital ratio was 58% as of Sept. 30, and Bowler said the ratio is expected to improve after the company settles remaining equity forward shares in the fourth quarter and again after the all-stock Essential transaction closes.
The company’s standalone five-year financing plan continues to anticipate $1.5 billion of external equity in 2029. Its 2027 financing plan includes $2 billion to $3 billion of long-term debt financing.
About American Water Works (NYSE:AWK)
American Water Works Company, Inc is a public water and wastewater utility that provides essential services to residential, commercial, industrial and institutional customers. Through its regulated businesses, the company supplies drinking water, collects and treats wastewater, and manages related infrastructure, including treatment plants, pipelines, storage facilities and customer service systems.
Founded in 1886, American Water has grown into one of the largest water and wastewater service providers in the United States.
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