Essential Utilities (NYSE:WTRG) reported higher third-quarter earnings and said it continues to expect its merger with American Water to close by the end of the first quarter of 2027, as the companies work through remaining state regulatory reviews.
The water and natural gas utility reported earnings of $0.36 per share under generally accepted accounting principles, up from $0.33 a year earlier. Excluding approximately $0.02 per share in merger-related expenses, adjusted earnings were $0.38 per share.
Chairman and CEO Chris Franklin said the results reflected growth across the water and gas businesses and expense management. The company invested about $1.1 billion in infrastructure during the first nine months of 2026 and remains on track to invest a record $1.7 billion for the year, he said.
Merger Approvals Advance
Franklin said Essential and American Water have reached settlements in Pennsylvania, North Carolina and Texas, subject to final approval from the respective state utility commissions. They have already received regulatory approvals in Kentucky, Ohio and Virginia.
During the question-and-answer session, Franklin said he expected decisions on the North Carolina and Texas settlements before the end of the year, although there was no defined schedule. In Pennsylvania, he expected a recommended decision from an administrative law judge around Thanksgiving, followed by action from the state utility commission likely after the start of the new year.
Franklin described discussions toward a settlement in New Jersey as constructive. CFO Dan Schuller said the company expected an Illinois commission order soon within that state’s statutory timeframe.
Asked why long-term guidance was not included in the latest press release, Franklin said providing forward earnings-per-share guidance did not make much sense given the expected merger. Decisions about financing would largely be up to the combined company’s board and management team, he said.
Franklin added that Essential continues to expect to invest at least $8.7 billion in its systems over the next five years.
Rate Recoveries Boost Earnings
Schuller said regulatory recoveries and surcharges increased quarterly earnings by $0.06 per share compared with a year earlier, with about 65% of that contribution coming from water operations. Higher water volumes added another $0.01 per share. Those gains were partly offset by higher depreciation and amortization and by higher interest expense and lower allowance for funds used during construction.
Operations and maintenance expenses fell approximately 0.6%, or $900,000. Schuller attributed the decline primarily to insurance recoveries and lower bad-debt expense in the regulated gas business, partly offset by merger expenses.
The insurance recovery was tied to stop-loss coverage for significant health insurance claims, Schuller said. Employee benefit expenses, including the reimbursement, declined by about $3.5 million, with most of the decrease driven by the recovery. The quarter also included about $4.9 million in merger-related expenses, he said.
Through the third quarter, Essential finalized rate cases or surcharges representing $70.5 million in incremental annualized revenue. About 75% came from water and wastewater operations, with the rest from gas, Schuller said.
The company has water and wastewater cases or surcharge proceedings pending in five states that seek more than $78.5 million in annualized increases. Its Pennsylvania natural gas subsidiary has requested a $163.2 million increase in a base rate case; an administrative law judge recommended approximately $105 million. Schuller said a final order is expected in December.
Acquisition Pipeline and Dividend
Franklin said Essential completed the $1.1 million purchase of Dril-Quip, a small water and wastewater system in Harris County, Texas, in October. The company also entered agreements to acquire assets serving roughly 4,100 customers in North Carolina and two Pennsylvania systems serving a combined 2,500 customers.
In total, Essential has signed asset purchase agreements worth approximately $290 million that are expected to serve about 208,000 customers. That total includes the DELCORA transaction, which remains under a stay imposed by a federal bankruptcy judge in connection with the City of Chester’s bankruptcy. Franklin said the agreement is assumable by American Water.
The company also has an active pipeline of potential water and wastewater acquisitions representing approximately 400,000 potential customers, Franklin said.
Essential’s board declared a quarterly dividend payable December 1, 2026, to shareholders of record on November 10. Franklin said the company has paid consecutive quarterly cash dividends for more than 80 years.
About Essential Utilities (NYSE:WTRG)
Essential Utilities, Inc is a regulated utility company that provides water and wastewater services through its Aqua operations and natural gas distribution through Peoples Natural Gas. Its services include treating and delivering drinking water, collecting and treating wastewater, and supplying natural gas to homes and businesses.
The company traces its water utility roots to the Springfield Water Company, founded in Pennsylvania in 1886. It adopted the Essential Utilities name in 2020, following its acquisition of Peoples Natural Gas and the expansion of its business beyond water and wastewater services.
Essential Utilities serves customers in several states, including Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia.
