Shareholders approved the merger with American Water with nearly 95% of shares voted in favor; Essential has completed seven state filings and still expects the transaction to close in Q1 2027, subject to state regulatory timelines and approvals.
Essential reported 2025 EPS of $2.20 (above guidance of $2.07–$2.11) and revenue up 18.6% to nearly $2.5B, driven by regulatory recoveries, higher purchased gas costs/volumes and other items, though results included several non‑recurring benefits and expenses.
The company invested a record $1.4 billion in regulated infrastructure in 2025 (guiding ~$1.7B for 2026), is executing a $450M PFAS treatment plan with 50+ advanced systems deployed, and raised the quarterly dividend 5.25% while targeting a 60–65% payout ratio.
Essential Utilities (NYSE:WTRG) executives highlighted 2025 earnings outperformance, record infrastructure spending, and progress toward the company’s proposed merger with American Water during the company’s full-year 2025 earnings call. Management also discussed regulatory activity, acquisitions, and ongoing work related to PFAS treatment investments.
Chairman and CEO Chris Franklin opened the call by noting that shareholders approved the merger with American Water at a recent special meeting, with nearly 95% of shares voted in favor of the deal. Franklin said the company’s research indicates the vote was secured “in record speed” compared with similar transactions.
Franklin also said Essential completed seven required state regulatory filings by year-end 2025. With initial procedural schedules received in most states, management said it continues to expect the transaction to close in the first quarter of 2027, noting that three states have statutory timelines while others do not. Franklin said he expects a “constructive outcome” based on the company’s regulatory relationships, while cautioning that the regulatory phase may not move as quickly as the shareholder approval process.
Franklin said Essential delivered 2025 earnings per share (EPS) of $2.20, above the company’s guidance range of $2.07 to $2.11. He added that even excluding non-recurring beneficial items discussed in company filings throughout the year, results would still have been above the guidance range.
Chief Financial Officer Dan Schuller said revenues rose 18.6% year over year, with favorable drivers partially offset by higher operations and maintenance (O&M) expenses, depreciation, interest, and taxes. Schuller also referenced the year-over-year comparison complexities tied to prior-year items, including a previously disclosed gain on the sale of the Pittsburgh area Energy Project and unanticipated weather in 2024.
Schuller walked through revenue and cost changes for the year:
Revenue increased $388.5 million, or 18.6%, from about $2.1 billion to nearly $2.5 billion.
Regulatory recoveries accounted for about $177.6 million of the increase.
Purchased gas expense (the cost of natural gas sold) increased $126.8 million, driven by higher commodity prices and usage.
Higher gas volumes contributed $57.2 million to revenue.
Other revenue impacts of $30 million reflected reduced tax repair surcredits to customers and impacts from the Pennsylvania gas business’s Universal Service rider, partially offset by weather normalization credits due to colder-than-normal weather in 2025.
Customer growth added $5.6 million, while lower water volumes (primarily due to wetter weather) reduced revenue by $8.6 million.
O&M expenses rose $52.3 million, or 8.9%. Schuller attributed the increase to higher employee-related costs ($26.9 million), a $17.5 million increase tied to the gas Universal Service rider (with an offset in revenues), and $8.5 million in higher water production costs, including increases in power, purchased water, and chemicals. Newly acquired systems added $1.7 million. Schuller said the “other” category reduced O&M by $2.6 million, reflecting items such as higher capitalization in the gas business, lower materials and supplies spending, and insurance-related benefits, offset by merger-related expenses. He added that normalizing for merger expenses, insurance proceeds, and growth yields an increase more in line with historical norms.
Schuller reviewed an EPS “waterfall” that began with 2024 GAAP EPS of $2.17 and referenced adjustments to arrive at 2024 non-GAAP income per share of $1.97, including removal of the one-time energy project gain and adjustments for unanticipated weather and related tax impacts.
For 2025, he cited EPS contributions of $0.46 from regulatory recoveries, $0.15 from higher gas volumes, and $0.01 from water growth, partially offset by $0.02 from lower water volume, $0.09 from higher expenses, and $0.48 categorized as “other.” Schuller said “other” includes $0.24 from the prior-year gain on the energy project and higher depreciation, amortization, interest, and taxes.
Management pointed to several non-recurring items contributing to 2025 results, including the release of an income tax reserve regulatory liability tied to the February 2025 Aqua Pennsylvania rate order, a favorable regulatory asset adjustment that reduced bad debt expense (including an item tied to a COVID-related reserve), insurance proceeds in the first quarter, and a benefit tied to closing a PNG sales and use tax audit in the second quarter. These were partially offset by merger-related expenses for banking, legal, and other matters.
Both Schuller and Franklin reaffirmed the company’s long-term target of 5% to 7% EPS growth over the 2024 through 2027 period, emphasizing that the growth rate should be applied off 2024 non-GAAP income per share of $1.97 given the one-time impacts in 2025.
Franklin said Essential increased its quarterly dividend by 5.25% in July and noted the company has delivered 35 increases in 34 years and has paid dividends for 80 consecutive years. He also said the company invested a record $1.4 billion in regulated infrastructure in 2025, and that it replaced or retired more than 400 miles of main across both business segments during the year. Looking ahead, he said 2026 regulated infrastructure investments are expected to be $1.7 billion.
On PFAS, Franklin said the company continued executing its $450 million PFAS capital plan, with more than 50 advanced treatment systems deployed across Pennsylvania and North Carolina. He reaffirmed Essential’s commitment to ensuring finished water meets federal maximum contaminant levels for EPA-regulated PFAS chemicals within EPA timelines and standards.
Franklin also discussed business development and acquisitions. In 2025, Essential completed three acquisitions of water and wastewater systems for approximately $58 million, adding more than 12,700 new customers when combined with organic growth. He said the company has three signed purchase agreements for systems in Pennsylvania and Texas that are expected to close in the first half of 2026. He added that the Pennsylvania Public Utility Commission approved Aqua Pennsylvania’s acquisition of the assets of the Greenville Municipal Water Authority without modification.
On DELCORA, Franklin said progress remains stalled by a “stay” tied to the City of Chester’s bankruptcy proceedings, though he expressed hope for movement following a Pennsylvania Supreme Court decision regarding the City of Chester and the Chester Water Authority. In response to an analyst question, Franklin described the situation as involving a reversionary provision tied to certain city assets, suggesting there could be an opportunity for Essential to pay for those assets—potentially above the current purchase price—to help the city’s bankruptcy exit efforts, while noting the amount would be small relative to the city’s reported obligations.
Schuller said Essential completed regulatory recoveries in 2025 totaling $101.5 million of incremental annualized revenue, including $92.6 million related to the water and wastewater business, with the remainder tied to the gas business. He added that, thus far in 2026, Essential has completed $12.4 million in regulatory recoveries across water, wastewater, and natural gas. Looking forward, management said the water and wastewater segment has filed for regulatory recoveries with a requested annualized revenue increase totaling $101.9 million.
During the Q&A, management also addressed the cadence of Pennsylvania rate cases, indicating that PNG and Rockland have historically followed a two-year cadence and suggesting that same cadence would imply filing “relatively quickly.” Management said merger-related regulatory proceedings and other rate-related filings are separate dockets and will be adjudicated separately in each state.
Franklin closed by reiterating commitments to maintaining a strong balance sheet, improving cash flow and debt metrics, and delivering consistent dividend growth while keeping the payout ratio between 60% and 65%.
Essential Utilities, Inc, formerly known as Aqua America, is a publicly traded water and natural gas utility holding company. Through its regulated water and wastewater subsidiaries, the company provides essential water services to residential, commercial and industrial customers. In addition, Essential Utilities delivers natural gas distribution services in Pennsylvania through its Peoples Gas subsidiary, offering integrated utility solutions under a unified corporate framework.
The company traces its roots to the Philadelphia Suburban Water Company, founded in 1886 to serve growing communities outside Philadelphia.
