Upcoming American Water Works Earnings Report on July 27: Key Points to Consider
In the world of utilities, American Water Works (AWK) continues to make waves with its ambitious growth plans and resilient performance. The company recently affirmed its 2022 earnings guidance and long-term financial targets through 2026, a testament to its confidence in its strategic direction.
For the five-year period through 2026, American Water projects an EPS compound annual growth rate of 7% to 9%. This optimistic outlook is underpinned by a series of strategic moves, including regulatory progress, acquisitions, and rate cases.
Looking at the immediate future, American Water expects earnings in the range of $4.39 to $4.49 per share for 2022. This forecast, combined with the company's dividend growth expectations averaging at the high end of the 7%-to-10% range, promises a promising year for shareholders.
However, the road to these projections is not without its challenges. Weather conditions, divestitures, and the impacts of climate change are among the factors influencing American Water's earnings expectations and guidance.
For instance, American Water's revenue for the year-ago quarter received a boost from average weather being hotter and drier than usual in its operating area. This trend, while beneficial in the short term, can lead to increased water usage and higher costs in the long run, as infrastructure needs and regulatory adjustments become necessary.
American Water has also divested its homeowner services business (Q4 2021) and its regulated utility businesses in two states, New York and Michigan (Q1 2022). While these moves may temporarily reduce revenue, they could potentially improve margins if underperforming assets are sold.
The company's management team will hold an analyst conference call on July 28 at 9 a.m. ET, providing an opportunity for investors to gain insights into American Water's strategic plans and financial performance.
As for the second quarter of 2022, Wall Street's consensus estimate for American Water's revenue is $973.5 million, down 2.6% from the year-ago period's $999 million. Despite this slight decrease, the adjusted EPS is expected to grow by 2.6%, with a consensus estimate of $1.17, up from $1.14 in the year-ago period.
American Water's adjusted operation and maintenance (O&M) efficiency ratio, a key indicator of cost control in its regulated business, stands at 33.9% for the trailing year, an improvement from 34.1% in the year-ago period. This indicates better cost control despite the challenges faced.
In conclusion, while the exact impact of weather, divestitures, and climate change on American Water's Q2 2022 revenue and earnings compared to Q2 2021 is not explicitly detailed, these factors likely contributed to increased revenues through higher rates and demand but simultaneously led to rising operating expenses and capital costs, putting upward pressure on costs and moderating earnings growth.
American Water Works (AWK) is scheduled to release its second-quarter 2022 results on July 27. The stock could potentially move if American Water decides to revise its 2022 earnings guidance in light of these dynamics.
[1] American Water Works Q2 2025 Earnings Release [5] American Water Works Q2 2024 Earnings Release
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