Yahoo Finance Why Is Essential Utilities (WTRG) Up 7.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Essential Utilities (WTRG). Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Essential Utilities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Essential Utilities Q3 Earnings & Sales Beat Estimates
Essential Utilities Inc. reported third-quarter 2022 operating earnings per share (EPS) of 26 cents, surpassing the Zacks Consensus Estimate of 23 cents by 13%. The bottom line also improved from the year-ago quarter’s earnings of 19 cents per share by 36.8%.
Earnings were driven by customer growth, increased volume in its regulated natural gas segment, increased volume and regulated water rates in its regulated water segment, which were offset by increased expenses and other items.
Total Revenues
Third-quarter operating revenues of $435 million surpassed the Zacks Consensus Estimate of $376 million by 15.6%.
Total revenues improved 20.1% year over year. The year-over-year improvement in total revenues was due to the recovery of purchased gas costs, customer growth and volume from the regulated water segment.
Highlights of the Release
Essential Utilities continues to expand operations through acquisitions. The potential water and wastewater municipal acquisitions will add nearly 430,000 customers to the existing customer base.
Currently, Essential Utilities signed seven purchase agreements to acquire additional water and wastewater systems that are expected to serve nearly 217,000 retail customers or equivalent dwelling units for $364.5 million.
Year to date, Essential Utilities’ regulated water segment has received rate awards or infrastructure surcharges in Illinois, North Carolina, Ohio and Pennsylvania totaling $83.3 million, and the regulated natural gas segment has received a rate award of $5.5 million in Kentucky.
Operation and maintenance expenses for the third quarter were $308.8 million, up 18.6% from the year-ago figure of $260.4 million.
Operating income was $125.8 million, up 23.9% year over year.
Interest expenses increased 16.1% to $60.5 million from $52.1 million in the year-ago quarter.
Financial Highlights
Current assets were $541.3 million as of Sep 30, 2022, compared with $437.8 million as of Dec 31, 2021. Long-term debt was $6,173.6 million as of Sep 30, 2022, higher than $5,779.5 million as of Dec 31, 2021.
Essential Utilities invested $719.7 million in the first nine months of 2022 to replace and expand the water and wastewater utility infrastructure, as well as upgrade the natural gas utility infrastructure.
Guidance
Essential Utilities reiterated its 2022 earnings guidance at $1.75-$1.80 per share.
For 2022, Essential Utilities expects its customer base in the water segment to expand 2-3% due to acquisitions and organic customer growth.
Essential Utilities also plans to invest $1 billion in 2022 and $3 billion through 2024 to improve the water and natural gas systems and better serve customers through the use of improved information technology.
Essential Utilities expects compound annual growth rate of 6 to 7% through 2024 and 8 to 10% through 2024 for its regulated water and regulated natural gas segment respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -6.25% due to these changes.
VGM Scores
Currently, Essential Utilities has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Essential Utilities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Essential Utilities belongs to the Zacks Utility - Water Supply industry. Another stock from the same industry, American Water Works (AWK), has gained 10.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
American Water Works reported revenues of $1.08 billion in the last reported quarter, representing a year-over-year change of -0.9%. EPS of $1.63 for the same period compares with $1.53 a year ago.
American Water Works is expected to post earnings of $0.82 per share for the current quarter, representing a year-over-year change of -3.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for American Water Works. Also, the stock has a VGM Score of D.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
