This report is an updated version of the report published on 4 March 2025 at 9:33 PM AEDT.

Essential Utilities, Inc. (NYSE: WTRG)

WTRG is a holding company for regulated utilities providing water, wastewater, or natural gas services. Its segments include the Regulated Water segment and the Regulated Natural Gas segment.

Recommendation Rationale – SELL at USD 39.10 

• Financial Highlights: WTRG’s interest expense increased to USD 302.47mn in FY24 vs USD 283.36mn in FY23. Net cash flows from operating activities decreased to USD 770.34mn in FY24 vs USD 933.59mn in FY23.
• Trading Near the Resistance: WTRG stock has surpassed its R1 level recommended on 29 January 2025. Therefore, share price can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow) are higher than the median of the utilities sector.
• Market Risk: WTRG group's strategy involves substantial investments in new projects and acquisitions, carrying risks such as project execution issues, cost overruns, integration challenges, equipment failures, accidents, and natural disasters, which could disrupt operations and cause financial losses.

WTRG’s Daily Price Chart

Valuation Methodology: EV/Sales Approach (FY December'25E) (Illustrative)

Stock might trade at a slight premium to its peers, considering factors such as operating revenues growth in FY24, increased operating income in FY24, and expected EPS in FY25. For conducting the valuation, the following peers have been considered: American Water Works Company Inc (NYSE: AWK), Nextera Energy Inc (NYSE: NEE), Atmos Energy Corp (NYSE: ATO), and others have been considered.

Considering that the stock has surpassed its R1 level, rally in share price, current trading level, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of USD 39.10, as of 3 March 2025.                                 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 4 March 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.