Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American Water Works Co Inc (AWK, Financial) delivered solid financial results in the second quarter and first half of 2024, with earnings per share (EPS) of $1.42 for the quarter.
- The company raised its 2024 EPS guidance to the top half of the range, now expecting $5.25 to $5.30 per share.
- AWK invested $1.4 billion in capital projects year-to-date, reflecting strong execution by their teams.
- The company added 43,000 customers in the first half of the year through acquisitions and organic growth.
- AWK published its latest sustainability report, highlighting its commitment to providing safe, clean, reliable, and affordable water and wastewater services.
Negative Points
- Earnings per share for the quarter were slightly down by $0.02 compared to the same period last year.
- The Pennsylvania regulatory environment presented challenges, with a lower-than-expected return on equity (ROE) of 9.45%, impacting revenue by $71 million.
- The company faces ongoing regulatory and operational challenges in Pennsylvania, including customer affordability and water quality issues.
- AWK's long-term financing costs increased by $0.11 per share, driven by higher capital costs and recent debt issuances.
- The company experienced a net unfavorable impact on earnings due to weather conditions, with a $0.04 per share negative effect quarter over quarter.
Q & A Highlights
Q: How does the recent Pennsylvania regulatory decision impact your strategy and capital allocation in the state?
A: (M. Susan Hardwick, CEO) The need for infrastructure investment in Pennsylvania remains, but we will evaluate how much capital to allocate to the state relative to others, given the low ROE result. We will not compromise on service or safety but will consider the return opportunity for investors. Our overall capital plans are not expected to change.
Q: Will the regulatory decision in Pennsylvania affect your M&A activities in the state?
A: (M. Susan Hardwick, CEO) We have a strong pipeline of acquisition opportunities in Pennsylvania and will continue to pursue them. The regulatory environment is challenging, but we believe the guidelines set by the commission are helpful. Our interest in growing through acquisitions in Pennsylvania remains unchanged.
Q: Can you provide more details on the guidance change and the factors contributing to it?
A: (John Griffith, CFO) The guidance change is primarily driven by lower-than-expected declines in customer usage, which contributed a few cents to the increase. Other factors include the timing of revenue increases and financing costs.
Q: What is the status of the Butler acquisition and its legal challenge?
A: (M. Susan Hardwick, CEO) The legal challenge is currently with the Commonwealth Court, and we are waiting for their decision. There is no definitive timeline for when the court will act.
Q: How does the recent Pennsylvania ROE decision affect your long-term EPS growth targets?
A: (M. Susan Hardwick, CEO) The Pennsylvania decision has been factored into our updated guidance. We have raised our 2024 EPS guidance and reaffirmed our long-term growth targets of 7% to 9%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
