Essential Utilities (WTRG) Down 11.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Essential Utilities (WTRG). Shares have lost about 11.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Essential Utilities due for a breakout? 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 drivers.
Essential Utilities Q2 Earnings On Par With Estimates
Essential Utilities Inc. delivered second-quarter 2023 operating earnings per share (EPS) of 34 cents, on par with the Zacks Consensus Estimate. The bottom line surpassed the year-ago quarter’s earnings of 31 cents by 9.7%.
Earnings from rates and surcharges and regulated water segment customer growth were offset by decreased regulated natural gas segment volume and other items.
Total Revenues
Second-quarter operating revenues of $437 million lagged the Zacks Consensus Estimate of $468 million by 6.7%. Total revenues were down 2.7% year over year.
Highlights of the Release
Essential Utilities continues to expand operations through acquisitions. On Jun 20, 2023, the company’s subsidiary, Aqua Ohio, acquired the Union Rome Sewer system in Lawrence County, OH, further expanding its operation.
Essential Utilities has signed four purchase agreements to acquire additional water and wastewater systems that will add 208,000 retail customers or equivalent dwelling units to its existing customer base for $336 million.
The company invested nearly $547.6 million in the first half of 2023 to improve its regulated water and natural gas infrastructure systems and to enhance customer service across its operations.
So far in 2023, the company’s regulated water segment has received rate awards or infrastructure surcharges worth $26.4 million and its regulated natural gas segment has received infrastructure surcharges worth $20.9 million.
Operation and maintenance expenses for the second quarter were $133.5 million, down 1.1% from the year-ago figure of $134.9 million.
Operating income was $155.3 million, up 12.7% year over year.
Interest expenses increased 25.4% to $69.2 million from $55.2 million in the year-ago quarter.
Financial Highlights
Current assets were $406.7 million as of Jun 30, 2023 compared with $658.2 million as of Dec 31, 2022.
Long-term debt was $6,484.5 million as of Jun 30, 2023, higher 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.
The company expects a compound annual growth rate of 6 to 7% through 2025 and 8 to 10% through 2025 for its regulated water and regulated natural gas segments, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Essential Utilities has a subpar Growth Score of D, however its Momentum Score is doing a lot 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 trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Essential Utilities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
