Essential (WTRG) Q2 Earnings Beat Estimates, Sales Up Y/Y

Zacks Equity Research
·4-min read

Essential Utilities Inc. WTRG reported second-quarter 2020 earnings per share of 29 cents, which beat the Zacks Consensus Estimate by 20.8%. However, the reported earnings were 21.6% lower than 37 cents per share recorded in the year-ago quarter.

Total Revenues

Second-quarter revenues of $384.5 million were up 75.6% year over year. The year-over-year improvement in total revenues was due to positive impact from rate increases, increased volume, residential demand growth due to favorable weather and contribution from the acquired natural gas assets.

Segment Details

The Regulated Water segment contributed $234.1 million to total second-quarter revenues. Revenues from this segment improved 7.4% year over year. Customer additions through organic and inorganic means, rate increase, along with higher residential volumes contributed to the revenue growth.

The Regulated Natural Gas segment contributed $149.6 million to total second-quarter revenues.

Essential Utilities Inc. Price, Consensus and EPS Surprise

Essential Utilities Inc. Price, Consensus and EPS Surprise
Essential Utilities Inc. Price, Consensus and EPS Surprise

Essential Utilities Inc. price-consensus-eps-surprise-chart | Essential Utilities Inc. Quote

Highlights of the Release

During the quarter, the company closed the acquisition of the East Norriton Township wastewater system in Pennsylvania, a utility with approximately 5,000 customer connections. In first-half 2020, it registered a 1.2% increase in the customer base through acquisitions and organic means.

Year to date, the regulated water segment has received rate awards in different jurisdictions that led to an increase in annualized revenues of the company by $10.2 million and the regulated natural gas segment has received rate awards that boosted annualized revenues by $1 million. The company currently has rate proceedings pending in Virginia, Ohio and New Jersey worth $5.2 million.

Operation and maintenance expenses increased 48.8% year over year to $128.6 million. This was attributed to an increase in Peoples transaction-related costs, and the regulated natural gas segment’s operation as well as maintenance expenses.

Operating income for the reported quarter was $123.1 million, up 52.2% year over year.

Interest expenses increased 63.1% to $51.7 million from $31.7 million in the year-ago quarter.

Financial Highlights

Current assets were $312.5 million as of Jun 30, 2020 compared with $2,015.1 million on Dec 31, 2019. Long-term debt was $5,174.6 million as of Jun 30, 2020, higher than $2,943.3 million on Dec 31, 2019.

Essential invested $293.1 million in the first half of 2020 to improve regulated water and natural gas infrastructure systems. This investment does not include an additional $53.5 million that was invested by Peoples, pre-closing, during the period from Jan 1, 2020 to Mar 15, 2020.

Guidance

Essential reiterated its 2020 earnings guidance in the range of $1.53-$1.58 per share. It expects the customer base from the water segment to expand 2-3% in 2020, depending on regulatory approval.

The company plans to invest $550 million in the regulated water segment and $400 million in the regulated gas segment in 2020. This capital expenditure is part of its total investment plan of $2.8 billion through 2022.

Other Water Utility Releases

Here are some other players from the water utility space that have reported second-quarter earnings:

While American Water Works Company AWK and Middlesex Water Company’s MSEX earnings beat the Zacks Consensus Estimate by 1% and 7.8%, respectively, American States Water Company’s AWR bottom line was on par with the same.

Zacks Rank

Currently, Essential carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Middlesex Water Company (MSEX) : Free Stock Analysis Report
 
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