Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 6 of last 7 quarters
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Essential Utilities has no direct AI infrastructure exposure, but its pending merger with American Water and continued rate-base growth are part of the broader utility consolidation trend. The company's $1.7 billion infrastructure investment plan, including PFAS treatment and gas meter upgrades, supports the reliability needs of the communities that host data centers and other AI-driven loads.
Essential Utilities reported Q2 GAAP EPS of $0.37 and non-GAAP EPS of $0.38, flat versus the prior year quarter. Earnings benefited from $0.06 in regulatory recoveries, $0.02 from higher water volumes, and $0.01 from customer growth, partially offset by higher operating expenses, lower gas volumes, and $0.06 from other items including increased depreciation and interest. Year-to-date capital investment reached $662 million, on track for a record $1.7 billion in 2026. The company completed the Integra Water acquisition and has signed agreements to add about 200,000 customers, while the DELCORA transaction remains stalled by a bankruptcy court stay.
Management reaffirmed its long-term 5% to 7% EPS growth target through 2027, anchored to non-GAAP 2024 EPS of $1.97. They expect to close the American Water merger in Q1 2027, with regulatory approvals already received in Kentucky, Ohio, and Virginia, and a settlement in principle reached in Texas. The company plans to file its next Aqua Pennsylvania water rate case around year-end, with a $163.2M gas rate case pending in Pennsylvania. Management emphasized continued strong capital investment of $1.7B in 2026, a focus on affordability, and a commitment to maintaining a payout ratio between 60-65%. They also noted a one-time benefit expected later this year that should help land within the guidance range.
“We are intent on hitting the ground running as a world class organization on the day after we close this transaction.”
on Merger integration
“We will file a case as we normally would have. With, all due respect to all the parties. And we will we will adjudicate it as such.”
on Pennsylvania rate case
“We are fully committed to our long term target of 5% to 7% normalized earnings per share growth using our non GAAP 2024 results of $1.97 per share as our baseline.”
on Earnings guidance
Can you give more details on how you're planning the future Aqua Pennsylvania rate case in light of the governor's focus on ROE and capital structure?
Management noted they delayed the filing to be thoughtful given other pending cases. They will file a case similar to past practice, respectful of the governor's position, and let the commission determine a fair return. They referenced the recent American Water case where the commission anchored around a 9.07% ROE.
How much of your CapEx qualifies for the DSIC versus what is recovered under the GRC?
Daniel Schuller said that for 2026, about 55% of Pennsylvania capital is DSIC-eligible, noting that in years with more pipe work the percentage would be higher. Chris Franklin added they will continue to press for expansion of the DSIC to include more capital items.
What items could move the merger close date earlier or later?
Chris Franklin said things are largely on track. The last statutory timeline is Illinois, which finishes in November. In Pennsylvania, the ALJ has 90 days to make a decision, which could move the timeline up if faster. He expects closing comfortably in Q1 2027 based on current timelines.