American Water 2025-26: $5.64 EPS, Essential Utilities Merger
FY25 revenue $5.14B (+10%); op income $1.88B (+9%); NI $1.11B (+6%); EPS $5.70 (adj $5.64 above guide). $3B+ capital invested. Essential Utilities merger announced (closes by Q1 2027). 47K customer connections via Nexus + others. FY26 adj EPS $6.02-$6.12 (+8%); 7-9% EPS/dividend growth through 2030; $2.5B external equity 2026-2030. Bills 1% of median household income.
Key takeaways
- Essential Utilities merger announced. Shareholders voted in favor; closes by end of Q1 2027. Combines America's two largest publicly-traded water utilities. Material rate base + earnings base step up.
- FY25 adj EPS $5.64 (+9% YoY) above guide. $5.18 → $5.64 = 8.9% growth. Above 8% target. Demonstrates regulatory + capital execution.
- $3B+ capital invested FY25. $3.3B FY guide unchanged through year. 8-9% rate base growth target through 2030 + $36B 5-year plan with $19B in transmission.
- Acquisition pipeline 47K+ customer connections. Nexus Water Group (~47K connections, closes Aug 2026); Pennsylvania + multi-state pipeline. Continued tuck-in M&A complementary to organic.
- FY26 adj EPS $6.02-$6.12 (+8%); LT 7-9% growth through 2030 and beyond. Projected $2.5B external equity 2026-2030 ($1B settled mid-2026 from equity forward). Maintains balance sheet strength.
Business
American Water Works Company is the largest publicly-traded US water + wastewater utility, serving 14M people across 14 states. Single regulated water/wastewater utility business:
- Regulated water utilities (~95% of revenue / earnings). 14 states; primarily New Jersey + Pennsylvania + California + Missouri + Illinois. Rate cases in multiple states ongoing FY25.
- Market-Based Operations (~5%). Military Services Group + Other.
Strategic moves FY25:
- Essential Utilities merger announced (closes Q1 2027 expected)
- Nexus Water Group acquisition agreement (~47K customer connections, $535M, closes Aug 2026)
- Missouri Test Year legislation signed (supportive)
- 87K customer connections under acquisition agreement
- $1.3B capex YTD H1 (on track for $3.3B FY)
- 8.2% dividend increase to $0.8275/quarter (FY25)
- Settlements: Missouri $63M annualized; Virginia $15M annualized; Iowa progressing; Hawaii partial; California rate case ongoing
- California decoupling bill progress
FY25 financial performance
| Metric (FY) | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue ($B) | 3.79 | 4.23 | 4.68 | 5.14 |
| Revenue YoY | n/a | +12% | +11% | +10% |
| Op income ($B) | 1.27 | 1.50 | 1.72 | 1.88 |
| Op margin | 33.6% | 35.5% | 36.7% | 36.6% |
| Net income ($B) | 0.82 | 0.94 | 1.05 | 1.11 |
| Diluted EPS ($) | 4.51 | 4.89 | 5.39 | 5.70 |
| Adj EPS ($) | n/a | n/a | 5.18 | 5.64 |
| FCF ($B) | -1.31 | -0.86 | -0.81 | -1.07 |
| Capex ($B) | -2.42 | -2.73 | -2.86 | -3.13 |
| Total debt ($B) | 12.45 | 12.44 | 14.11 | 15.92 |
| Dividends ($M) | -467 | -532 | -585 | -633 |
The earnings progression: revenue 3-yr CAGR ~11%; op margin steady at 36.7% → 36.6%; adj EPS $5.64 (+9% from $5.18). Negative FCF normal for capex-heavy utility (~60% of revenue capex).
Total debt $15.92B (+13% YoY) reflects capital plan funding. Dividend $-633M (+8% YoY); $3.31/share annual.
Capital allocation
- Capex: $-3.13B FY25 (~61% of revenue). Deeply negative FCF reflects rate-base-funded model.
- Dividends: $-633M FY25 (+8% YoY); $3.31/share. 8.2% raise FY25.
- Buybacks: $0 (utility model).
- Debt: $15.92B (+$1.81B YoY).
- Equity: $2.5B external 2026-2030 planned.
- M&A: 47K connections at $535M; multi-state acquisition pipeline.
FY26-30 outlook (per Q4 2025 call, 2026-02-19)
| Framework | Detail |
|---|---|
| FY26 adjusted EPS | $6.02 to $6.12 (+8% midpoint) |
| LT EPS growth | 7% to 9% through 2030 and beyond |
| LT dividend growth | 7% to 9% (in line with EPS) |
| Rate base growth | 8% to 9% (driving EPS) |
| External equity 2026-2030 | $2.5B (~$1B settled mid-2026 from equity forward) |
| Bills as % of household income | <1% |
| Essential Utilities merger | Closes by Q1 2027 |
The 7-9% EPS/dividend growth through 2030 + Essential Utilities merger = structural compounding. Rate base growth 8-9% drives the algorithm.
Key risks
- Essential Utilities merger. Material integration risk + regulatory approval + closing timing.
- Rate case progress. Multi-state rate case progress affects revenue timing; ALJ recommendations + final decisions.
- Equity issuance pace. $2.5B 2026-2030 equity (vs prior plan implications) — dilution depends on issuance + EPS growth balance.
- PFAS / lead regulation. FY25 noted no changes to current investment plans, but regulatory regime evolves.
- Tariff / supply chain. Predominantly domestic supply chain; limited tariff exposure.
- Acquisition integration. Nexus + multi-state acquisitions require integration capability.
Bottom line
AWK FY25 is the structurally compounding regulated water utility year: adj EPS $5.64 (+9%), $3B+ capex, 47K customer connections under acquisition, Essential Utilities merger announced, FY26 $6.02-$6.12 adj EPS guide. 7-9% EPS/dividend growth through 2030 with 8-9% rate base growth driving the algorithm. Risks are merger integration + rate cases + equity needs. Quality regulated water utility with the cleanest LT compounding profile in the sector.
Citations
- American Water Works Co. FY25 Form 10-K (filed February 2026, SEC EDGAR).
- AWK Q4 2025 earnings call, 2026-02-19 — adj EPS $5.64 (+9%); $3B+ capex; Essential Utilities merger announced (closes Q1 2027); FY26 guide $6.02-$6.12; LT 7-9% EPS/dividend growth through 2030; $2.5B equity 2026-2030.
- AWK Q2 2025 earnings call, 2025-07-31 — H1 EPS $2.53; FY guide narrowed $5.70-$5.75; Nexus Water Group ~47K connections; California decoupling bill progress.
- AWK Q1 2025 earnings call, 2025-05-01 — Q1 EPS $1.05 (+11%); Missouri Test Year legislation signed; Q1 settlement $63M; Virginia $15M; 8.2% dividend raise to $0.8275/quarter.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).