American Water Works (NYSE:AWK) reported 2025 results near the upper end of its expectations and reaffirmed its 2026 earnings outlook, while also providing updates on rate cases, capital investment, acquisitions, and its pending merger with Essential Utilities during its fourth quarter 2025 earnings conference call.
2025 results and key drivers
President and CEO John Griffith said the company delivered adjusted earnings per share of $5.64 for 2025, up from $5.18 in 2024, representing 8.9% growth. Griffith attributed the performance to execution of the company’s plan, including regulatory progress and infrastructure investment to support safe, reliable, and affordable service to approximately 14 million people across its footprint.
Shift to adjusted EPS reporting
Chief Financial Officer David Bui said the company will discuss EPS on an adjusted basis going forward to remove the impact of items such as merger-related transaction costs, which he said will better reflect ongoing performance across periods. He noted that a reconciliation of historical GAAP EPS to adjusted EPS was included in the slide appendix.
Reviewing key 2025 earnings drivers, Bui said revenues increased by $1.70 per share, driven by authorized rate increases to recover investment, plus contributions from water and wastewater acquisitions and organic customer growth. Operating and financing items also rose:
- O&M expense increased $0.42 per share, primarily from employee-related costs and increased production costs, including higher purchased power pricing.
- Depreciation increased $0.41 per share, consistent with investment growth.
- Financing costs increased $0.35 per share, also tied to the investment program.
Rate cases and regulatory activity
Bui highlighted six rate cases completed in 2025, calling out a December final order in Kentucky that authorized an annualized revenue increase of $18 million, based on a 9.7% return on equity and an equity layer “just north of 52%.” He said the company’s rate cases are built on recovering significant capital expenditures needed across its systems, including acquired systems.
He also noted California granted a further one-year extension of its cost of capital filing to May 1, 2027, setting authorized cost of capital beginning Jan. 1, 2028. Under that structure, he said the company’s ROE will remain 10.2% through Dec. 31, 2027, unless a cost of capital mechanism is triggered later in 2026.
Across active cases, Bui said American Water has general rate cases in progress in seven jurisdictions. He said cases in West Virginia and Maryland were furthest along, with final orders expected in “the coming weeks,” while Virginia and California were progressing as expected.
The company also outlined recently filed cases:
- Pennsylvania: Filed Nov. 14 reflecting $1.2 billion in system investments through mid-2027; seeking $169 million of annual revenue; new rates, if approved, expected to take effect in August 2026.
- New Jersey: Filed Jan. 16 reflecting $1.4 billion in system investments through Dec. 2026; seeking $146 million of additional annual revenue; new rates, if approved, expected in fall 2026.
- Illinois: Filed Jan. 27 reflecting $577 million in system investments through Dec. 2027; seeking a two-step increase totaling $134 million of additional annual revenue; step one, if approved, expected to take effect in January 2027.
During Q&A, management said cases were progressing as expected and that the company is open to settlements if terms are constructive and provide a fair return.
On questions about affordability scrutiny in Pennsylvania and New Jersey, management said rate cases are driven by investment needs and that the company generally operates on a two-year cycle in Pennsylvania and does not see that changing. Management also reiterated its view that its bills remain affordable, citing its under-1% of median household income metric and a forecast to remain below 1% through 2035 across its system.
Capital spending, acquisitions, and PFAS settlement proceeds
Chief Operating Officer Cheryl Norton said American Water invested approximately $3.2 billion of capital into its systems in 2025, in line with expectations. She described the capital program as comprising hundreds of projects, focused primarily on pipe replacement, along with above-ground treatment upgrades, PFAS remediation, lead service line removals, and technologies such as smart meters.
Norton said the company continues to expect its capital investments and acquisitions will grow regulated rate base at a long-term rate of 8% to 9%. She also reiterated the company’s residential bill affordability target and outlook, stating bills are projected to remain under 1% of customers’ median household income over the long term.
On acquisitions, Norton said the company had 104,000 customer connections under agreement from deals totaling $582 million, and said American Water’s acquisition program is improving as it invests in dedicated resources to pursue a 2% goal for customer additions.
Regarding the Nexus Water Group systems, Norton said regulatory approval is progressing and that early termination of the waiting period was granted under the Hart-Scott-Rodino Act. She said approvals have been received in several states, with about five states remaining, and that the company continues to view an August 2026 closing as favorable.
She added that beyond Nexus, the company has 19 acquisitions in six states under agreement for $267 million, representing about 58,000 additional customer connections, excluding the proposed Essential Utilities merger.
Also during Q&A, Norton addressed PFAS settlement-related proceeds, saying the company has received some payments and has been providing them back to customers where commissions have allowed. She said the company is still working through regulatory processes for some customer paybacks and expects additional payments in future periods, including “next year and the year after that,” based on how payments were structured.
2026 guidance, financing plan, and merger timeline
Griffith said the company is affirming 2026 adjusted EPS guidance of $6.02 to $6.12, representing expected 8% growth versus 2025. He said the company remains aligned with its longer-term expectation of consistent EPS and dividend growth within the 7% to 9% range through 2030 and beyond.
Bui said the company is also affirming its financing plan for 2026 through 2030, including an estimated $2.5 billion of external equity issuances. That plan includes approximately $1 billion to be settled in mid-2026 from an equity forward initiated the prior August, with no other equity issuances planned until 2029, according to Bui.
He also noted that a $795 million secured seller note due from the sale of HOS was repaid in full on Feb. 13. Bui said this aligned with the company’s 2026 guidance assumption of repayment around year-end 2025. He added that the company’s Military Services Group, which serves 18 military installations, is expected to contribute incrementally to earnings growth in 2026.
On the balance sheet, Bui said total debt to capital as of Dec. 31, net of $98 million of cash, was 59%. He said the company expects the HOS note repayment and the mid-2026 equity forward settlement, along with planned long-term debt financing in 2026, to keep it within its target of less than 60% debt to total capital. He also said S&P rates the company A with a stable outlook and that Moody’s affirmed a Baa1 rating with a stable outlook.
On the pending merger with Essential Utilities, Griffith said the companies have achieved several milestones since the October announcement, including filing for necessary approvals. He said shareholders of both companies “overwhelmingly voted in favor” of merger-related proposals at special meetings held on Feb. 10. Griffith said the companies expect to close the transaction by the end of the first quarter of 2027.
In response to a question about Peoples Gas and potential strategic actions after the merger, management said it would review strategic alternatives after closing and that if a sale were pursued, proceeds would be reinvested into the business, including a portion for debt repayment and a portion for continued rate base investment.
About American Water Works (NYSE:AWK)
American Water Works Company, Inc (NYSE: AWK) is a publicly traded utility company that provides water and wastewater services in the United States. Its core business is the operation, management and maintenance of regulated water and wastewater systems that deliver potable water, collect and treat wastewater, and provide related customer services to residential, commercial and industrial customers as well as municipalities. The company’s operations include water treatment and distribution, wastewater collection and treatment, meter reading and billing, emergency repairs, and long-term infrastructure planning and capital project execution.
In addition to its regulated utility operations, American Water offers complementary nonregulated services and solutions that support system reliability and customer needs.
