H2O America Narrows Standalone 2026 EPS Range

The Tip Desk · October 27, 2026 · 4 min read

The water utility closed Quadvest for $542.7 million and cut its 2026 capital plan to about $465 million.

H2O America (HTO) narrowed its standalone 2026 adjusted diluted EPS outlook to $3.10-$3.16 from $3.08-$3.18, keeping the $3.13 midpoint, and initiated 2026 guidance of $2.91-$2.97 that includes the Quadvest and pending Cibolo Valley acquisitions and their financings.

The San Jose, California-based water and wastewater utility said the standalone range excludes those deals, which it expects to be initially dilutive before a consolidated Texas general rate case, planned for the first half of 2027, can lift rates to reflect the acquired rate bases. It left its long-term non-linear adjusted diluted EPS CAGR target of 6-8%, anchored off 2025 adjusted diluted EPS of $2.99, unchanged, and still expects a non-linear CAGR at or above the top of that range over 2026-30.

On October 1, the company completed the Quadvest asset purchase for $542.7 million in cash, expanding regulated and wholesale operations in greater Houston. Active Quadvest connections rose 14%, or 7,700, in the first nine months of 2026, to 62,200 at September 30. Connections under contract and pending development grew 13%, or 11,300, in 2026, to more than 98,000. The company said it expects Texas to move from 8% of the consolidated customer base at year-end 2025 to 26% by 2029. It plans more than $750 million of capital investments through 2030 across the combined Texas Water Company enterprise. The Cibolo Valley wastewater plant and collection systems, serving more than 1,500 connections, are expected to close November 2.

Third-quarter operating revenue was $250.2 million, up 4% from $240.6 million a year earlier, slower than the 6% year-over-year increase in the second quarter and 9% in the first. Rate increases of $16.2 million, nearly half from higher pass-through water costs, drove the gain, primarily in California and Connecticut. Lower customer consumption of $4.1 million and $2.6 million of regulatory mechanism adjustments offset part of that lift.

GAAP net income was $43.0 million, down 5% from $45.1 million in the year-ago quarter, reversing an 8% year-over-year increase in the second quarter and a 15% increase in the first. Adjusted net income was $45.2 million, down 1% from $45.5 million. GAAP diluted EPS was $0.99 versus $1.27 a year earlier; adjusted diluted EPS was $1.04 versus $1.27. The company said net income was down modestly while EPS fell more because of a higher share count from an at-the-market program used throughout 2025 and a common-stock issuance in early March 2026.

Operating expenses were $189.7 million, up 8% from $175.9 million. Water production costs rose $5.0 million on higher purchased-water and groundwater-extraction unit costs, partly offset by lower usage. Depreciation and amortization increased $3.7 million on plant placed in service. Merger and acquisition costs rose $3.1 million related to Quadvest. Other operating expenses rose $2.0 million, primarily outsourced services. Operating income was $60.5 million, down from $64.6 million a year earlier. The effective tax rate was 11% in both third quarters.

Through September 30, the company had invested $325.1 million in infrastructure. It cut its full-year 2026 company-funded capital plan to approximately $465 million from $483 million, citing higher developer-funded capital at the Texas subsidiary, partly offset by planned Quadvest capex after the October 1 close. The $2.7 billion 2026-30 capital plan was unchanged.

Connecticut Water Company’s general rate case seeks a $28.8 million annual revenue increase to recover about $145 million of investments not yet in rates; a proposed final decision is expected in mid-December. Maine Water Company’s first consolidated case seeks a $9.5 million increase for an anticipated $36 million of investments, with new rates expected by the second quarter of 2027. San Jose Water Company’s PFAS compliance filing estimates about $176 million of capital, with a proposed CPUC decision expected in the second quarter of 2027. Texas Water Company’s system improvement charge order, effective October 1, resulted in a $0.2 million decrease in annual revenues versus the $5.1 million increase sought in an October 2025 application.

The board declared a $0.44 quarterly cash dividend, payable December 1. The 2026 annualized dividend is expected to be $1.76 a share versus $1.68 in 2025.