Essential Utilities, Inc. (WTRG): Results of Operations and Financial Condition
Essential Utilities, Inc. (WTRG) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Essential Utilities Reports Q2 2026 Results Affirms Financial and Growth Guidance · GAAP Earnings of $0.37 per share for Q2 2026 and adjusted earnings per share of $0.38 (non-GAAP) which exclude transaction costs associated with the pending merger with American Water
How this was made
The 30-second read
Why it matters
Traders can update valuation and positioning based on the combination of (1) reported Q2 EPS and revenue, (2) affirmed 2026 EPS growth guidance, (3) a higher dividend with a defined payable date, and (4) additional state-level merger approvals that reduce regulatory overhang.
Market read
This is a primary-source earnings and corporate update with explicit EPS, guidance affirmation, dividend details, and new merger regulatory milestones.
What to watch
The natural gas segment showed revenue decline on warm-weather volume; investors may focus on whether weather normalization could pressure future quarters even with water segment growth.
Essential Utilities Reports Q2 2026 Results Affirms Financial and Growth Guidance
Quarterly revenue increased 3%, while GAAP net income and GAAP earnings per share were below the prior-year period. The company affirmed its long-term earnings growth and infrastructure-investment guidance.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | $530.9 million | – | 3% |
| Operations and maintenance expensesGAAP | $153.6 million | – | 3.5% |
| Operations and maintenance expenses excluding merger related costsnon-GAAP | . | – | 2.6% |
| Net incomeGAAP | $105.7 million | – | – |
| Earnings per shareGAAP | $0.37 | – | – |
| Adjusted earnings per sharenon-GAAP | $0.38 | – | – |
| First six months revenueGAAP | $1,392.6 million | – | 7.2% |
| First six months operations and maintenance expensesGAAP | $329.4 million | – | – |
| First six months merger related expensesGAAP | $17.5 million | – | – |
| First six months net incomeGAAP | $330.1 million | – | – |
| First six months earnings per shareGAAP | $1.16 per share | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Regulated water segmentRegulatory recoveries and increased volume were the largest contributors to the increase in revenues for the period. | $357.5 million | – | 7.6% |
| Regulated natural gas segmentHigher rates and surcharges, a decrease in purchased gas costs, and lower volumes due to warm weather conditions during the second quarter of 2026 as compared to 2025. | $169.3 million | – | – |
2026 and three-year period through 2027 outlook
- NoteAnticipated growth in long-term earnings per share at a compound annual growth rate of 5% to 7% from the adjusted 2024 earnings per share of $1.97 (non-GAAP) for the three-year period through 2027.
- NoteIn 2026, regulated infrastructure investments are expected to be $1.7 billion.
- NoteMultiyear plan to ensure that finished water does not exceed the federal maximum contaminant level of the six EPA-regulated PFAS chemicals.
Capital returns
- Increased the quarterly cash dividend, 5.25% to $0.3606 per share of common stock.
- This dividend will be payable on September 1, 2026, to shareholders of record on August 11, 2026.
- Essential Utilities has paid consecutive quarterly cash dividends for over 80 years and has increased the dividend 36 times in the last 35 years.
What drove it
- Additional revenues from regulatory recoveries and purchased gas costs were the main quarterly revenue drivers.
- Quarterly operations and maintenance expense increased primarily due to employee-related costs of $5.9 million, including annual merit increases and higher medical claims, and production costs for water and wastewater operations of $2.3 million.
- Expense increases were offset by a decrease in insurance expenses of $4.9 million primarily due to insurance recoveries, a decrease in bad debt expense of $2.9 million, a decrease in customer assistance surcharge costs of $1.5 million, and merger-related expenses of $1.2 million.
- The regulated water segment's operations and maintenance expenses were $109.4 million for the second quarter of 2026, compared to $100.1 million in the second quarter of 2025.
- The regulated natural gas segment's operations and maintenance expenses were $49.9 million for the second quarter of 2026, compared to $49.8 million in the second quarter of 2025.
- For the first six months of 2026, revenue growth was primarily due to regulatory recoveries, increased purchased gas costs, and higher volumes in the regulated natural gas segment.
- Thus far in 2026, the regulated water segment received rate awards or infrastructure surcharges that will increase annual revenues by $43.9 million, and the regulated natural gas segment received rate awards or infrastructure surcharges of $12.7 million.
Concerns
- GAAP net income was $105.7 million in the second quarter of 2026, compared to $107.8 million for the same period in 2025.
- First-half net income was $330.1 million, compared to $391.6 million for the same period of 2025.
- The natural gas segment reported lower volumes due to warm weather conditions during the second quarter of 2026 as compared to 2025.
- The company has base rate cases or infrastructure surcharges pending in Texas, Virginia, Illinois, Indiana and New Jersey for its regulated water and wastewater segment for an estimated $79.7 million in incremental annual revenues.
- The company has a natural gas base rate case pending in Pennsylvania with a requested revenue increase of $163.2 million.
- Guidance excludes DELCORA and other potential acquisitions from the company's acquisition opportunities list that represents over 400,000 customer equivalents.
- Guidance includes the expectation that the company will continue to issue equity and debt on an as-needed basis to support acquisitions and capital investment plans.
What to watch
- Progress toward the expected first-quarter 2027 closing of the merger with American Water.
- Outstanding regulatory consents and approvals for the merger with American Water.
- Pending water and wastewater rate cases or infrastructure surcharges representing an estimated $79.7 million in incremental annual revenues.
- The Pennsylvania natural gas base rate case requesting a $163.2 million revenue increase.
- Execution against the planned $1.7 billion of 2026 regulated infrastructure investments.
- Closing of signed water and wastewater purchase agreements expected to serve over 200,000 customers or equivalent dwelling units and total approximately $282 million in purchase price.
- The multiyear plan addressing the six EPA-regulated PFAS chemicals.
Balance sheet and cash flow
- As of June 30, 2026, Essential’s weighted average cost of fixed-rate long-term debt was 4.16%.
- The company had $960 million available on its credit lines.
- Essential invested approximately $662.2 million in the first six months of 2026 to improve its regulated water and natural gas infrastructure systems and to enhance customer service across its operations.
Analysis
Essential Utilities reported a mixed second quarter. Revenue was $530.9 million, compared with $514.9 million in the second quarter of 2025, with regulatory recoveries and purchased gas costs identified as the main drivers. GAAP net income was $105.7 million versus $107.8 million, and GAAP earnings per share was $0.37 versus $0.38. Adjusted earnings per share was $0.38 and excluded transaction costs associated with the pending merger with American Water.
The regulated water segment reported revenue of $357.5 million and stated growth of 7.6%, driven primarily by regulatory recoveries and increased volume. Its operations and maintenance expenses rose to $109.4 million from $100.1 million, reflecting employee-related costs, water and wastewater production costs, and operating costs tied to acquired systems. Regulated natural gas revenue was $169.3 million compared with $177.3 million in the second quarter of 2025, with warm-weather-related volume pressure offsetting higher rates and surcharges and changes in purchased gas costs. Natural gas operations and maintenance expenses were essentially flat at $49.9 million compared with $49.8 million.
The first-half comparison requires attention. Revenue was $1,392.6 million, up 7.2% from $1,298.5 million, but operations and maintenance expenses reached $329.4 million compared with $286.3 million, including $17.5 million of merger related expenses. First-half net income was $330.1 million, or $1.16 per share, compared with $391.6 million, or $1.41 per share. The company said full-year water-segment operations and maintenance expenses, excluding one-time items and abnormal weather, are expected to be in line with historic norms.
Capital deployment remains central to the reported plan. Essential invested approximately $662.2 million during the first six months and remains on track to invest $1.7 billion in 2026. Rate activity has produced awards and surcharges across both utility segments, while additional water, wastewater, and natural-gas rate matters remain pending. The company also increased its quarterly dividend 5.25% to $0.3606 per share and reported $960 million available on credit lines, alongside a 4.16% weighted average cost of fixed-rate long-term debt.
Management affirmed its anticipated 5% to 7% compound annual growth rate in long-term earnings per share from adjusted 2024 earnings per share of $1.97 (non-GAAP) through 2027, as well as the $1.7 billion infrastructure-investment plan for 2026. Merger execution is the key corporate development: approvals have been received in Virginia, Kentucky, and Ohio, and the company continues to expect the American Water merger to close in the first quarter of 2027. Guidance excludes DELCORA and other potential acquisitions, although signed water and wastewater transactions are included subject to the conditions stated in the release.
Management, verbatim
Our commitment to operational efficiency, proactive cost optimization, and value driven customer experience investments underpins our confidence in driving strong performance for 2026. While our organization transitions towards the targeted Q1 2027 merger with American Water, we remain steadfast in our commitment to driving peak operational performance.
Christopher Franklin, Chairman and Chief Executive Officer
The regulatory approval processes for our merger with American Water continue to progress. On June 22nd, we received approval of the merger from the Virginia State Corporation Commission, and on May 14 th we received approval from the Public Utilities Commission of Ohio.
Christopher Franklin, Chairman and Chief Executive Officer
Not in the filing
stated, not guessed- Gross profit and gross margin
- Operating income and operating margin
- Adjusted net income
- Prior-year adjusted earnings per share
- Quarterly operating cash flow
- Quarterly free cash flow
- First-half operating cash flow
- First-half free cash flow
- Cash and cash equivalents balance
- Total debt balance
- Share repurchases
- Guidance for revenue, gross margin, operating expenses, tax rate, or annual earnings per share
- Previous-release outlook for comparison
- Prior-quarter comparisons for reported metrics
- Year-over-year percentage changes for GAAP net income, GAAP earnings per share, first-half operations and maintenance expenses, first-half net income, and first-half earnings per share
- Prior-year revenue figure for the regulated water segment is internally described in the filing as '$332.3 million in the second quarter of 2026'; a standard prior-year segment revenue field is therefore not reported without conflict.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Essential Utilities filed an 8-K with Exhibit 99.1 covering Q2 2026 results, dividend increase, financing/capex updates, and regulatory progress on its pending merger with American Water.
Ticker impact
Essential Utilities reported Q2 2026 GAAP EPS of $0.37, affirmed 2026 EPS growth of 5% to 7%, and raised its quarterly dividend 5.25%.
Likely supportive near-term bias, with additional upside sensitivity if the market interprets the merger approvals as de-risking the 2027 close timeline.
The article provides fresh, specific financial results and explicit guidance affirmation, and it adds concrete regulatory milestones (Ohio and Virginia approvals, plus prior Kentucky approval) tied to the pending American Water merger.
Market effects
Reinforces the regulated utility narrative of steady earnings visibility via rate recoveries, infrastructure surcharges, and capital investment plans.
Adds incremental confidence for multi-state regulated water and gas operators in Ohio, Virginia, and Kentucky where approvals were cited.
Limited direct global relevance; primarily impacts US regulated utility deal and rate-case sentiment.
Counterpoint
Merger-related expenses and the gap between now and the targeted Q1 2027 close could still introduce execution and timing risk despite regulatory approvals.
Key entities
- companyEssential Utilities, Inc.
NYSE-listed regulated water and natural gas utility reporting Q2 2026 results and affirming 2026 growth guidance while progressing a merger with American Water.
- companyAmerican Water
Counterparty in the pending merger referenced as the driver of transaction-cost exclusions and the target Q1 2027 merger timing.
- regulatorPublic Utilities Commission of Ohio
Cited as approving the merger with American Water (approval received May 14, 2026).
- regulatorVirginia State Corporation Commission
Cited as approving the merger with American Water (approval received June 22, 2026).
- regulatorKentucky Public Service Commission
Cited as having previously approved the merger (approval received prior to the other two states).
