American Water Works Company, Inc. (AWK) Earnings & Analysis

Latest quarter

American Water reported Q3 FY2026 revenue of $1.5 billion, above the consensus by 2.57%, although both figures round to $1.5 billion. Adjusted earnings of $2.00 per share missed the $2.11 consensus. On a GAAP basis, diluted earnings were $1.94 per share, the same as a year earlier.

The company’s filing shows that quarterly operating revenue rose $60 million from a year earlier. Authorized rate increases, including infrastructure surcharges, contributed $72 million, while acquisitions and organic growth added $23 million. Unfavorable weather reduced revenue by $18 million, and lower customer demand reduced it by $13 million.

The filing said higher depreciation and financing costs, along with increased operating costs, partly offset growth from new rates. Operating margin was 42.5%, compared with 42.3% a year earlier. American Water’s quarterly free cash flow was −$160.0 million, compared with −$33.0 million in the prior-year quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Financial Officer David Bowler said new authorized rates raised revenue as American Water recovered investment across its states. He said depreciation, financing costs and general taxes also increased, while operations and maintenance costs rose modestly from the prior period.

On pricing, Bowler said New Jersey approved a $68 million annualized increase in water and wastewater revenue, with new rates effective September 15. In Illinois, he said an administrative law judge proposed $67 million in incremental revenue, compared with the company’s updated request of $104 million. Bowler said a final order was expected no later than December 18, with new rates to be implemented January 1, 2027.

In the Q&A, Bowler said “the vast majority of it is locked in” when discussing the timing of Pennsylvania and New Jersey rate cases and expected new rates elsewhere. He said Pennsylvania and New Jersey represent 40% to 45% of the business, while the Illinois case still required a final order.

Chief Executive John Griffith said the company had invested $2.8 billion in capital projects and acquisitions through the first nine months of 2026 and added nearly 81,000 customer connections across 10 states. Bowler said a California application updated the estimated cost of Monterey-area desalination facilities to $825 million plus an allowance for funds used during construction; the application remains subject to public comment and commission review and approval.

Griffith said the company had reached merger settlements in Pennsylvania, Texas and North Carolina, and that the federal waiting period had expired. He said American Water continued to expect its proposed merger with Essential Utilities to close by the end of the first quarter of 2027. Asked about guidance after the merger, Bowler said the company would update its 2027 outlook after closing.

Guidance

American Water narrowed its 2026 adjusted earnings guidance to $6.07 to $6.12 per share from $6.02 to $6.12. Griffith said the revised range reflected results and the outlook for the rest of the year; Bowler also cited additional revenue expected in several states in the fourth quarter.