American States Water Profit Jumps 25% as Rate Hikes Kick In
American States Water posted second-quarter diluted earnings of $1.09 a share, up 25.3% from $0.87 a year earlier, as new water rates and a rebound in consumption drove the sharpest quarterly profit growth in a year.
American States Water Company (AWR), the regulated water and electric utility holding company that also provides contracted water services on U.S. military bases, reported second-quarter diluted earnings of $1.09 a share, up 25.3% from $0.87 a year earlier. The increase marked a sharp acceleration from the 8.6% year-over-year growth posted in the first quarter of 2026 and from the 11.6% gain and 1.3% decline recorded in the third and fourth quarters of 2025, respectively.
The swing traced largely to the water utility segment, where earnings rose $0.18, or 24.7%, to $0.91 a share, compared with increases of just $0.03, $0.02 and $0.06 in the three preceding year-over-year comparisons. Second-year rate increases approved by the California Public Utilities Commission took effect January 1, 2026, and combined with a 4% rise in water consumption to lift segment results. That consumption trend represented a reversal from the first quarter, when usage was flat with the prior year and $4.8 million in added supply costs from purchased water occurred while some wells sat offline. Those wells came back online in the second quarter, giving the utility a more favorable, less purchased-water-dependent supply mix.
Total operating revenue grew 11.2% to $181.3 million from $163.1 million a year earlier. Water segment revenue rose 9.5% to $131.1 million, while contracted services revenue climbed faster, up 20.3% to $36.6 million from $30.4 million. Operating expenses grew only 4.6%, well below the pace of revenue growth, and operating margin expanded to 35.3% of revenue from 31.2% in the year-earlier quarter.
The contracted services segment, which serves U.S. military installations, added $0.03 a share, or 23%, to reach $0.16, as construction activity picked up and the company resolved economic price adjustments that lifted management fee revenue. That gain followed a $0.05 increase in the fourth quarter of 2025 and reversed a $0.06 decline in the second quarter of 2025 that had been tied to construction timing. On the strength of that momentum, American States Water raised its full-year 2026 guidance for contracted services earnings to $0.63 to $0.67 a share, up from the $0.59 to $0.63 range it had guided for full-year 2025.
The company narrowed its 2026 capital spending target for the regulated utilities to $185 million to $220 million, tightening the top end from the $225 million ceiling guided in the first quarter of 2026 and in the fourth quarter of 2025.
American States Water completed its $200 million at-the-market equity offering program in June 2026, reaching the program's maximum capacity, and does not plan further equity issuance through at least the end of 2029. The dilution from that program weighed on results, cutting earnings by $0.02 a share in the quarter and $0.04 a share year to date, and weighted average diluted shares outstanding rose 2.2% to 39,478,000 from 38,642,000 a year earlier.
The company raised its quarterly dividend 8.2% to $0.5455 a share from $0.5040, matching increases of similar magnitude announced with each of the prior three quarterly results. The increase marked the 72nd consecutive annual dividend increase, up from the 71st cited a year earlier.