On November 6, 2024, American States Water Co (AWR, Financial) released its 8-K filing detailing its financial performance for the third quarter of 2024. The company reported earnings per share (EPS) of $0.95, which, while representing a $0.10 increase from the same period last year, fell short of the analyst estimate of $0.97. Revenue for the quarter was $161.78 million, slightly above the estimated $161.00 million.
Company Overview
American States Water Co is a California-based water and utilities holding company. It operates through three segments: water, electric, and contracted services. The company conducts water and electric operations through Golden State Water Company and Bear Valley Electric Service, Inc., while contracted services are managed by American States Utility Services and its subsidiaries. The majority of its revenue is derived from water services provided to commercial and residential customers.
Performance and Challenges
American States Water Co's performance in the third quarter was driven by its water utility segment, which saw a $0.12 per share increase in earnings. This was largely due to favorable investment gains and rate increases approved by the California Public Utilities Commission (CPUC). However, the electric segment experienced a decline in earnings, primarily due to increased interest expenses and pending rate case finalizations.
The company's contracted services segment remained stable, with a slight decrease in earnings per share due to rounding effects. The challenges faced by the electric segment highlight the importance of regulatory approvals and interest rate management in maintaining profitability.
Financial Achievements
American States Water Co achieved significant milestones, including settlement agreements authorizing nearly $650 million in capital investments for its regulated utilities. The contracted services business was awarded $54 million in new construction projects, expected to contribute $0.54 to $0.57 per share for the full year 2024. Additionally, the company increased its quarterly dividend by 8.3%, marking the 70th consecutive year of dividend growth.
Key Financial Metrics
The water segment's operating revenues increased by approximately $7.8 million, driven by rate increases and a higher authorized rate of return. Operating expenses rose by $2.8 million, primarily due to higher labor costs and regulatory expenses. Interest expenses increased by $1.6 million, reflecting higher borrowing levels and interest rates.
For the nine months ended September 30, 2024, consolidated diluted EPS was $2.42, down from $2.82 in the same period of 2023. Adjusted EPS, excluding retroactive rate impacts, showed an increase, highlighting the underlying strength of the water segment.
Analysis and Outlook
American States Water Co's third-quarter results underscore the critical role of regulatory environments and interest rate fluctuations in the utilities sector. The company's strategic investments and consistent dividend growth are positive indicators for long-term stability. However, the pending electric rate case and interest rate pressures remain key areas to watch.
Overall, American States Water Co's performance reflects its resilience and adaptability in a challenging regulatory landscape, with its water segment continuing to drive growth and profitability.
Explore the complete 8-K earnings release (here) from American States Water Co for further details.
