• Earnings Per Share (EPS): $5.39 for 2024, reflecting an 8% growth.
• Weather Impact on EPS: $0.12 per share favorable impact from drier than normal weather.
• Interest Income Impact on EPS: $0.09 per share from the HOS note.
• Capital Investment: Over $3 billion invested in 2024.
• Customer Growth: Nearly 70,000 new customer connections through acquisitions.
• Rate Cases: Seven rate cases completed in 2024, including significant cases in Illinois and California.
• Debt-to-Capital Ratio: 57% at the end of 2024.
• 2025 EPS Guidance: Affirmed at $5.65 to $5.75 per share, representing 8% growth.
• Long-term EPS Growth Target: 7% to 9% through 2029.
• Regulated Rate Base Growth: Expected at 8% to 9% long-term.
• Pipe Replacement: Approximately 400 miles of pipe replaced in 2024.

• Warning! GuruFocus has detected 4 Warning Signs with AWK.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Water Works Co Inc (NYSE:AWK) delivered 2024 financial results in line with expectations, achieving earnings of $5.39 per share, reflecting an 8% EPS growth.
• The company successfully completed several significant general rate cases in 2024, driven by necessary infrastructure investments, enhancing service reliability for over 14 million people.
• AWK invested over $3 billion in 2024, including acquisitions that added nearly 70,000 customer connections, meeting their 2% compounded annual growth target.
• The company affirmed its 2025 earnings guidance of $5.65 to $5.75 per share, expecting 8% EPS growth, and maintained a strong financial position with a debt-to-cap ratio of 57%.
• AWK's capital investment program is expected to grow the regulated rate base at a long-term rate of 8% to 9%, with a focus on customer affordability and infrastructure renewal.

Negative Points

• The company faces ongoing challenges with regulatory environments, as seen in California where a full decoupling mechanism was not recognized, prompting a motion for rehearing.
• Operating costs increased by $0.22 per share in 2024, driven by employee-related costs and production costs related to fuel, power, and chemicals.
• AWK's acquisition growth is described as 'lumpy,' with potential delays in closing processes affecting the consistency of customer growth through acquisitions.
• The company anticipates issuing $2.5 billion of external equity from 2025 to 2029, which could be dilutive and is subject to market conditions.
• Despite strong execution, AWK continues to face challenges related to declining water usage per customer, which could impact future revenue growth.

Q & A Highlights

Q: With recent executive orders and news from DC, has there been any change in American Water's strategy regarding PFAS costs? A: Cheryl Norton, COO, stated that there have been no changes to their plans. They continue to invest capital as previously discussed to meet regulatory requirements and provide clean, safe water.

Q: Should the $0.10 from the remarketing of loans be included in the base for the 7% to 9% EPS growth rate? A: David Bowler, CFO, clarified that the $0.10 should be excluded from the base when considering the EPS growth rate.

Q: Can you elaborate on the added business development capabilities across your footprint? A: Cheryl Norton, COO, explained that they have increased staffing in their RBD group and enhanced corporate support teams to drive consistency in integration and due diligence processes, leading to growth across their entire footprint.

Q: Are there any disruptions in procurement for large capital projects? A: Cheryl Norton, COO, confirmed that their robust supply chain organization has successfully procured necessary supplies for all capital investments, including PFAS work, without disruptions.

Q: Regarding the Missouri rate case, do you expect to reach a settlement before hearings start? A: John Griffith, President, expressed that based on past experiences, they expect to reach a settlement prior to the start of hearings.

Q: Is there any impact from economic development promoting more customer growth in your service territory? A: John Griffith, President, noted that while there are economic development opportunities, such as additional infrastructure, they do not expect massive increases in water demand as water generally has excess capacity.

Q: Is there any change in the company's approach to ESG and diversity, given some language changes in the 10-K? A: John Griffith, President, confirmed that there is no change in strategy; ESG remains a business-driven proposition to achieve expected results.

Q: Could you comment on the use of hybrids instead of traditional equity for financing? A: David Bowler, CFO, stated that hybrids are not cost-effective for them compared to straight equity, given how they trade.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.