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Essential Utilities (WTRG)
NYSE:WTRG
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Essential Utilities
(NYSE:WTRG)71Outperform
Positive Factors
Earnings
WTRG outperformed expectations on both revenue and profit, demonstrating strong operational execution.
Growth Opportunities
The re-initiation of long-term EPS guidance and strong Q3 performance increases confidence in Essential Utilities' multi-year outlook.
Negative Factors
Regulatory Challenges
Court proceedings related to the DELCORA acquisition are beyond WTRG's control, leading to uncertainty in EPS and capex guidance.
Essential Utilities (WTRG) vs. S&P 500 (SPY)
Market Cap
$10.65B
Dividend Yield3.28%
Average Volume (3M)1.61M
Price to Earnings (P/E)17.9
Beta (1Y)0.47
Revenue Growth1.57%
EPS Growth16.50%
CountryUS
Employees3,258
SectorUtilities
Sector Strength79
IndustryRegulated Utilities
Share Statistics
EPS (TTM)2.17
Shares Outstanding274,922,760
10 Day Avg. Volume2,083,391
30 Day Avg. Volume1,609,474
Financial Highlights & Ratios
PEG Ratio1.08
Price to Book (P/B)N/A
Price to Sales (P/S)5.15
Price to Cash Flow (P/CF)18.20
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$42.50Price Target Upside9.68% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Essential Utilities Business Overview & Revenue Model
Company DescriptionEssential Utilities, Inc. is a holding company, which engages in the provision of water and wastewater services. It supports a range of customers across Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, and Virginia. It also provides services through operating and maintenance contracts with municipal authorities and other parties including water and sewer line repair service and protection solutions to households. The company was founded in 1968 and is headquartered in Bryn Mawr, PA.
How the Company Makes MoneyEssential Utilities generates revenue through the provision of essential utility services, primarily water, wastewater, and natural gas. The company's revenue model is based on billing customers for the consumption of these services. In the water and wastewater segment, revenue is earned through service charges, consumption-based billing, and infrastructure improvement surcharges. In the natural gas segment, revenue comes from the sale and distribution of natural gas to residential, commercial, and industrial customers, with earnings influenced by rates approved by regulatory bodies. The company may also engage in infrastructure investments and improvements, which can lead to rate adjustments and additional revenue. Regulatory approvals and partnerships with local municipalities are key factors contributing to Essential Utilities' ability to maintain and grow its earnings.
Essential Utilities Financial Statement Overview
Summary
Essential Utilities exhibits strong revenue growth and profitability, supported by its position in the regulated utilities industry. However, the absence of equity in 2024 and a decreasing asset base on the balance sheet pose potential risks. The cash flow statement reveals challenges with negative free cash flow, highlighting the need for strategic financial management.Income Statement
Essential Utilities demonstrates a strong financial performance with a consistent revenue growth trajectory from $889.7M in 2019 to $2.09B in 2024. The gross profit margin remains robust at 100% due to the nature of the regulated utility industry, where gross profit often equals total revenue. The net profit margin has improved from 25.2% in 2019 to 28.5% in 2024, indicating enhanced profitability. However, the EBIT and EBITDA margins have slightly decreased from their peak in 2019, suggesting some operational cost pressures.85
Very Positive
Balance Sheet
The balance sheet reflects a concerning absence of reported stockholders' equity in 2024, making it difficult to assess the company's financial stability using traditional metrics like the debt-to-equity ratio. In previous years, the equity ratio indicated moderate leverage, with a decline in stockholders' equity from $5.89B in 2023 to zero in 2024, posing potential risks. The company's total assets have decreased from $16.84B in 2023 to $11.08B in 2024, which could signal divestitures or impairments.45
Neutral
Cash Flow
The cash flow analysis presents mixed results. Operating cash flow has been relatively stable, demonstrating the company's ability to generate cash from its core operations. However, the free cash flow has consistently been negative, reaching -$559.4M in 2024, primarily due to significant capital expenditures. The free cash flow to net income ratio is negative, highlighting potential challenges in funding investments without external financing.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.09B | 2.05B | 2.29B | 1.88B | 1.46B | Gross Profit |
| 2.09B | 1.13B | 1.07B | 987.30M | 768.34M | EBIT |
| 757.67M | 692.10M | 661.19M | 602.71M | 434.69M | EBITDA |
| 1.25B | 1.06B | 990.45M | 908.35M | 716.36M | Net Income Common Stockholders |
| 595.31M | 498.23M | 465.24M | 431.61M | 284.85M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 9.16M | 4.61M | 11.40M | 10.57M | 4.83M | Total Assets |
| 18.03B | 16.84B | 15.72B | 14.66B | 13.71B | Total Debt |
| 7.73B | 7.09B | 6.80B | 5.98B | 5.67B | Net Debt |
| 7.72B | 7.08B | 6.79B | 5.97B | 5.67B | Total Liabilities |
| 11.83B | 10.95B | 10.34B | 9.47B | 9.02B | Stockholders Equity |
| 6.20B | 5.90B | 5.38B | 5.18B | 4.68B |
| Cash Flow | Free Cash Flow | |||
| -559.40M | -265.52M | -462.46M | -375.84M | -327.62M | Operating Cash Flow |
| 770.34M | 933.59M | 600.31M | 644.68M | 508.02M | Investing Cash Flow |
| -1.16B | -1.22B | -1.18B | -1.06B | -4.33B | Financing Cash Flow |
| 397.48M | 281.36M | 578.83M | 417.12M | 1.96B |
Essential Utilities Technical Analysis
Positive
38.75
Price Trends
35.54
Positive
37.16
Positive
37.51
Positive
Market Momentum
0.85
Negative
69.35
Neutral
89.75
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WTRG, the sentiment is Positive. The current price of 38.75 is above the 20-day moving average (MA) of 36.33, above the 50-day MA of 35.54, and above the 200-day MA of 37.51, indicating a bullish trend. The MACD of 0.85 indicates Negative momentum. The RSI at 69.35 is Neutral, neither overbought nor oversold. The STOCH value of 89.75 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WTRG.
Essential Utilities Risk Analysis
Essential Utilities disclosed 37 risk factors in its most recent earnings report. Essential Utilities reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Essential Utilities Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $1.83B | 19.00 | 6.87% | 2.98% | 11.65% | 6.78% | |
75 Outperform | $2.70B | 13.97 | 11.65% | 2.46% | 30.48% | 267.73% | |
74 Outperform | $27.14B | 25.83 | 10.44% | 2.19% | 10.63% | 10.38% | |
73 Outperform | $2.96B | 24.50 | 12.96% | 2.34% | -0.04% | -5.82% | |
71 Outperform | $10.65B | 17.86 | 9.60% | 3.28% | 1.57% | 16.50% | |
65 Neutral | $12.05B | 15.92 | 6.71% | 4.32% | 8.04% | 3.76% | |
61 Neutral | $460.69M | 21.68 | 8.79% | 2.57% | 9.03% | -7.20% |
* Utilities Sector Average
Performance Comparison
WTRG
Essential Utilities
38.75
4.98
14.75%
AWR
American States Water
77.61
7.85
11.25%
AWK
American Water
139.20
21.62
18.39%
CWT
California Water Service
46.57
2.05
4.60%
SJW
SJW
54.47
-0.97
-1.75%
YORW
The York Water Company
33.56
-0.84
-2.44%
Essential Utilities Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: 3.31% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance, successful regulatory outcomes, and significant progress in strategic initiatives like PFAS mitigation and data center growth opportunities. However, challenges such as stock performance and operational difficulties with receivership cases were noted. Overall, the positive aspects of growth and strategic execution outweigh the challenges.Highlights
Strong Earnings Performance
Essential Utilities reported GAAP earnings per share of $2.17 for 2024, up from $1.86 in 2023. Non-GAAP earnings were $1.97 per share, in line with the guidance of $1.96 to $2.00.
Successful Regulatory Outcomes
The company achieved successful water and natural gas rate cases in Pennsylvania, which make up 75% of operations. Weather normalization was established, with January 2025 adjustments benefiting both customers and shareholders.
Dividend Growth
The board raised the dividend by 6% in 2024, continuing a 30-plus year track record of growing the dividend.
Capital Plan Execution
Completed a $1.3 billion capital plan on target, with an expectation to spend nearly $8 billion over the next five years.
PFAS Mitigation Progress
Invested $27 million in PFAS mitigation, completed work at 13 plants, and developed a patent-pending solution marketed to other utilities.
Lean Practices and Operational Excellence
Emphasizing lean practices across the company to continue operational excellence, with a focus on sustainable business practices.
Data Center Growth Opportunity
In discussions with data center developers representing up to five gigawatts of needed power generation in the Pittsburgh region.
Lowlights
Stock Performance Challenges
Despite being the strongest performing water stock in 2024, Essential Utilities was disappointed in not seeing successes reflected in current valuation.
Receivership Challenges
Named receiver for ten neglected water and wastewater systems in Pennsylvania, requiring capital investment and improvements.
Company Guidance
During the Essential Utilities earnings call for the fiscal year 2024, the company provided extensive guidance for the upcoming years. They reported a GAAP earnings per share (EPS) of $2.17 for 2024, which included a gain on sale of assets, while the non-GAAP EPS, excluding this gain, was $1.97. The company reiterated its long-term growth guidance of 5% to 7% EPS growth through 2027, starting from the $1.97 non-GAAP base. Essential Utilities plans to invest $1.4 to $1.5 billion in capital in 2025 and nearly $8 billion over the next five years. This is expected to result in an annual rate base growth of over 8%, with the water and natural gas segments projected to grow at compounded annual growth rates of approximately 6% and 11%, respectively. The company also highlighted its dividend growth, regulatory accomplishments, and ongoing efforts to mitigate PFAS contamination, which involves a projected $450 million capital spend. They anticipate raising $315 million through their ATM program in 2025 to support these initiatives.Essential Utilities Corporate Events
Executive/Board Changes
Roderick K. West Resigns from Essential Utilities Board
Neutral
Feb 18, 2025
On February 15, 2025, Roderick K. West resigned from the Board of Directors and all associated committees of Essential Utilities, Inc., a decision driven by his new role as CEO of Algonquin Power and Utilities Corp. His departure was not due to any disagreements with Essential Utilities, indicating a smooth transition without operational, policy, or practice disputes.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.