American Water Works Company, Inc.

What they do

American Water operates regulated water and wastewater utilities in 14 states, serving about 3.6 million active customers. It also provides water and wastewater services to U.S. government installations and municipalities through its 'Other' segment. The regulated businesses generated $4,723 million in 2025 revenue, representing 92% of total operating revenues.

Revenue drivers

• Regulated Businesses - Residential/Commercial — The core utility operations, accounting for 92% of total revenue ($4,723M in 2025), with top states Pennsylvania, New Jersey, and Missouri contributing 24.1%, 23.4%, and 12.2% of regulated revenue respectively.
• Water service revenue — The largest component of regulated revenue, with $931M in Pennsylvania, $1,024M in New Jersey, $548M in Missouri, $435M in Illinois, and $364M in California for 2025.
• Wastewater service revenue — A smaller but growing contributor, with $195M in Pennsylvania, $95M in Illinois, $67M in New Jersey, $23M in Missouri, and $5M in California for 2025.
• Other services — Includes military and municipal contracts; contributes ~8% of total revenue (roughly $400M in 2025), not material enough to be a separate segment.

Recent performance

For Q2 2026 (quarter ended June 30, 2026), GAAP diluted EPS was $1.61, up from $1.48 in Q2 2025. Year-to-date 2026 GAAP EPS was $2.61 versus $2.53 in the prior period. Adjusted non-GAAP EPS was $1.61 for Q2 and $2.62 for H1 2026. Total assets stood at $36.45B and cash at $191M as of June 30, 2026.

Strategy

American Water is pursuing growth through rate cases, infrastructure investment, and acquisitions. The company has a $3.7B capital investment plan for 2026 and has added ~52,000 customer connections through acquisitions (including Nexus Water systems) in the first half. The proposed merger with Essential Utilities is expected to close by end of Q1 2027, with three state approvals and a settlement in principle in Texas. Management targets long-term EPS and dividend growth of 7-9% per year.

Risks

• Regulatory lag and rate case outcomes — The rate-setting process can delay cost recovery, and adverse decisions by state PUCs could reduce revenue or returns.
• Environmental and water quality regulation — Compliance with PFAS and other emerging contaminants could increase operating costs and capital spending.
• Water supply limitations and climate impacts — Drought, overuse, or restrictions on water sources could limit supply, raise costs, or reduce demand.
• Merger integration and completion risk — The Essential Utilities merger remains subject to approvals and could face delays or be blocked, while integration costs may pressure earnings.

Outlook

Management affirmed 2026 adjusted EPS guidance of $6.02-$6.12, excluding merger-related transaction costs, weather impacts, and incremental HOS note interest. They expect to fund the capex program with a mix of debt and equity, with plans to issue additional common stock under forward sale agreements. The merger with Essential is expected to close by end of Q1 2027, with integration planning progressing.