Key Highlights

  • Operating revenues rose 4.1% to USD 1.51 billion, and operating income climbed 4.4% to USD 641 million.
  • GAAP diluted EPS was flat at USD 1.94, while adjusted diluted EPS increased to USD 2.00 from USD 1.89.
  • General rate case authorizations effective during 2026 total USD 179 million of annualized incremental revenue.
  • The company invested USD 2.8 billion in the first nine months and plans about USD 3.7 billion for 2026.

American Water Works Company, Inc. (NYSE:AWK) reported third-quarter 2026 operating revenues of USD 1.51 billion, up 4.1% from USD 1.45 billion a year earlier but below a consensus estimate of USD 1.58 billion. GAAP diluted earnings per share were USD 1.94, unchanged from the prior-year quarter and below a consensus estimate of USD 2.04. Adjusted diluted EPS, a non-GAAP measure, was USD 2.00 compared with USD 1.89, which also sits below that consensus estimate.

Net income attributable to common shareholders was USD 387 million, up from USD 379 million. The company said revenue growth from new rates in its regulated businesses, tied to the recovery of capital and acquisition investments, was partly offset by higher depreciation, financing costs and operating expenses.

Cost Structure and Adjustments

Operating expenses rose to USD 869 million from USD 837 million, with depreciation and amortization up USD 19 million to USD 245 million and operation and maintenance up USD 8 million to USD 531 million. Operating income increased to USD 641 million from USD 614 million. Interest expense grew to USD 167 million from USD 158 million, and interest income fell to USD 3 million from USD 23 million after the Homeowner Services Group seller note was repaid in February.

The reconciliation from GAAP to adjusted EPS added USD 0.06 this quarter, made up of USD 0.03 for the estimated weather impact and USD 0.03 for transaction costs tied to the pending Essential Utilities merger. Merger-related costs recorded in operation and maintenance were USD 6 million for the quarter and USD 28 million in total since 2025. For nine months, GAAP EPS was USD 4.56 against USD 4.47 and adjusted EPS was USD 4.63 against USD 4.40.

Rate Cases, Merger and Funding Plans

New general rate cases effective in 2026 are worth USD 179 million in annualized revenue, led by Pennsylvania at USD 75 million and New Jersey at USD 68 million, and infrastructure surcharges added USD 105 million. Pending requests include Missouri at USD 179 million, Illinois at about USD 104 million for 2027, Kentucky at USD 18 million and a California case for 2027 through 2029. An administrative law judge recommended a 9.67% return on equity in the Illinois case on October 23, with a final order due by December 18.

The merger agreement with Essential offers its shareholders 0.305 shares of American Water stock per share, and the company projects closing by the end of the first quarter of 2027. Approvals from Kentucky, Ohio and Virginia have been received, and the antitrust waiting period expired on August 14. The company issued USD 500 million of 5.550% senior notes due 2033 on September 16, has 4,694,836 shares left under its forward sale agreements, and held USD 1.34 billion of liquidity at quarter end.

Variables to Monitor

Four dated items stand out. The first is the Essential closing, targeted by the end of the first quarter of 2027 with remaining utility commission approvals outstanding. The second is the Illinois final order, due by December 18, 2026, with new rates scheduled for January 1, 2027, against a proposed order that recommended against the second-step increase. The third is PFAS litigation: four additional class settlements totaling about USD 149 million have a final fairness hearing set for January 15, 2027, with USD 108 million sitting in escrow. The fourth is the debt-to-capitalization ratio of 0.58 against a 0.70 covenant ceiling, with USD 250 million of 3.000% notes due December 1, 2026.