Essential Utilities Posts Slower Growth as Interest Costs Rise
Operating income rose 4.3% to $193.3 million as margins widened slightly.
Essential Utilities Inc. (WTRG), a regulated water and natural-gas utility, reported slower second-quarter revenue growth as warm weather weighed on gas demand. Revenue rose 3.1% to $530.9 million, easing from 10% growth in the first quarter.
GAAP net income declined 1.9% to $105.7 million, and diluted earnings fell to $0.37 a share from $0.38 a share. Adjusted earnings were $0.38 a share after excluding merger costs. Interest expense increased 11.7% to $89.1 million, offsetting part of the improvement in operating income.
The water segment remained the main source of growth. Revenue increased 7.6% to $357.5 million, led by regulatory recoveries and higher volume, slightly faster than its 7.4% first-quarter increase. Water operating and maintenance expense rose 9.3% to $109.4 million, outpacing the segment's revenue growth.
Natural-gas revenue declined 4.5% to $169.3 million as warm weather reduced volumes and purchased-gas costs fell. That reversed a 12.4% first-quarter increase during colder conditions. Gas operating and maintenance expense was essentially flat at $49.9 million.
For the first half, revenue rose 7.2% to $1.393 billion, while net income fell 15.7% to $330.1 million and earnings declined to $1.16 a share from $1.41 a share. Adjusted earnings were $1.21 a share after excluding $17.5 million of merger costs. Total first-half operating and maintenance expense increased 15.1%, more than twice the pace of revenue growth.
Essential reiterated its outlook for 5% to 7% compound annual adjusted-earnings growth through 2027 and $1.7 billion of infrastructure investment in 2026. The company invested about $393.2 million during the second quarter, roughly 46% more than in the first quarter.
The company raised its quarterly dividend 5.25% to $0.3606 a share. It also secured merger approvals in Kentucky, Ohio and Virginia while maintaining an expected closing in the first quarter of 2027. Pending water and wastewater acquisitions totaled about $282 million and represented more than 200,000 customer equivalents.