Advertisement

Essential Utilities (WTRG) Up 2.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Essential Utilities (WTRG). Shares have added about 2.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Essential Utilities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Essential Utilities Q3 Earnings Surpass Estimates

Essential Utilities Inc. delivered third-quarter 2023 operating earnings per share (“EPS”) of 30 cents, which surpassed the Zacks Consensus Estimate by a penny. The bottom line beat the year-ago quarter’s earnings of 26 cents by 15.4%.

Earnings during the quarter benefited from higher revenues from regulatory recoveries and lower expenses were marginally offset by decreased volume from the regulated water segment and other items.

Total Revenues

Third-quarter operating revenues of $411.3 million lagged the Zacks Consensus Estimate of $462 million by 10.9%. Total revenues were down 5.4% year over year.

Highlights of the Release

Essential Utilities invested nearly $874.5 million in the first nine months of 2023 to improve its regulated water and natural gas infrastructure systems and to enhance customer service across its operations.

Essential Utilities continues to expand operations through acquisitions. Year-to-date 2023, the company has acquired seven systems that have collectively added more than $44.5 million in rate base and more than 11,000 new customers or equivalent dwelling units to the company’s portfolio.

Essential Utilities signed five purchase agreements to acquire additional water and wastewater systems that will add 211,000 retail customers or equivalent dwelling units to its existing customer base for $354 million.

Year-to-date 2023, the company’s regulated water segment has received rate awards or infrastructure surcharges worth $42.4 million and its regulated natural gas segment has received infrastructure surcharges worth $21.3 million.

Operation and maintenance expenses for the third quarter were $147.1 million, down 2.8% from the year-ago figure of $151.4 million.

Operating income was $137.4 million, up 9.1% year over year.

Interest expenses increased 13.4% to $68.6 million from $60.5 million in the year-ago quarter.

Financial Highlights

Current assets were $409.4 million as of Sep 30, 2023 compared with $658.2 million as of Dec 31, 2022.

Long-term debt was $6,456.1 million as of Sep 30, 2023, lower than $6,615.5 million as of Dec 31, 2022.

Guidance

Essential Utilities reaffirmed its 2023 earnings in the range of $1.85-$1.90 per share. The mid-point of the guidance range is a tad higher than the Zacks Consensus Estimate of $1.86 per share.

The company expects its customer base in the water segment to expand by 2-3% through acquisitions and organic customer growth.

Essential Utilities also plans to invest $1.1 billion in 2023 and $3.3 billion through 2025 to improve the water and natural gas systems and better serve customers using improved information technology.

WTRG expects a compound annual growth rate of 6-7% through 2025 and 8-10% through 2025 for its regulated water and regulated natural gas segments, respectively.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Essential Utilities has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Essential Utilities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Essential Utilities is part of the Zacks Utility - Water Supply industry. Over the past month, American Water Works (AWK), a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended September 2023 more than a month ago.

American Water Works reported revenues of $1.17 billion in the last reported quarter, representing a year-over-year change of +7.9%. EPS of $1.66 for the same period compares with $1.63 a year ago.

American Water Works is expected to post earnings of $0.87 per share for the current quarter, representing a year-over-year change of +7.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -3%.

American Water Works has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Essential Utilities Inc. (WTRG) : Free Stock Analysis Report

American Water Works Company, Inc. (AWK) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Advertisement