Essential Utilities Q3 Profit Rises 12.8% on Rate Gains as American Water Merger Stays on Track for Early 2027

Essential Utilities grew third-quarter profit 12.8% as rate increases lifted revenue at both its water and natural gas businesses, and the company said it still expects its merger with American Water to close in the first quarter of 2027.

The Bryn Mawr, Pennsylvania-based utility reported GAAP net income of $103.8 million, or $0.36 per share, for the quarter ended Sept. 30, compared with $92.1 million, or $0.33 per share, a year earlier, according to its earnings release. Adjusted EPS, which excludes costs tied to the pending merger, was $0.38.

Revenue rose 6.6% to $508.3 million from $477.0 million. The company said regulatory recoveries and higher purchased gas costs were the main drivers.

"Our strong performance this quarter highlights the consistent earnings growth generated by both our water and natural gas divisions," Chairman and CEO Christopher Franklin said in the release.

Water and gas both grew

The regulated water segment, the larger of the two businesses, posted revenue of $380.6 million, up 4.5% from $364.1 million. Rate recoveries and a larger customer base drove the gain, the company said.

The regulated natural gas segment grew faster. Revenue rose 13.0% to $122.6 million from $108.5 million on higher rates and surcharges, higher purchased gas costs and greater customer usage during the quarter.

Costs held steady. Operations and maintenance expenses slipped 0.6% to $152.2 million, helped by insurance recoveries and lower bad debt expense in the gas segment. Excluding merger-related costs, O&M fell $5.9 million. Operating income climbed 13.5% to $192.7 million.

Interest expense was a headwind, rising 11.0% to $91.3 million from $82.3 million.

Nine-month picture

For the first nine months of 2026, revenue rose 7.1% to $1.90 billion. Net income fell 10.3% to $434.0 million, or $1.53 per share, from $483.7 million, or $1.73 per share. The income statement shows income tax expense of $16.4 million this year versus an $11.7 million tax benefit in the year-earlier period. Merger-related expenses totaled $22.5 million through the third quarter, and adjusted EPS for the nine months was $1.58.

Rates, spending and deals

Essential said it invested an estimated $1.1 billion in water and gas infrastructure through September and remains on track to invest $1.7 billion in 2026.

So far this year, the water segment has received rate awards or infrastructure surcharges that will add $53.6 million in annual revenue across six states, and the gas segment has received $16.9 million in Pennsylvania and Kentucky. Water rate cases or surcharges pending in five states represent an estimated $78.5 million in incremental annual revenue, the company said. Its Pennsylvania gas utility has a base rate case pending that requests a $163.2 million revenue increase.

The company continues to buy municipal systems. It has signed asset purchase agreements totaling an estimated $290 million that would serve more than 208,000 customers or equivalent dwelling units, including its $276.5 million agreement for the Delaware County Regional Water Quality Control Authority in suburban Philadelphia.

Merger with American Water

Regulators in Kentucky, Ohio and Virginia have approved the merger with American Water, according to the release. Settlement agreements have been reached with regulators in Pennsylvania, North Carolina and Texas, though each still needs approval from the applicable utility commission.

The board declared a quarterly dividend of $0.3606 per share on Oct. 21, payable Dec. 1 to shareholders of record on Nov. 10. As of Sept. 30, Essential had $759 million available on its credit lines.

By the numbers

• Revenue: $508.3 million, up 6.6%
• GAAP EPS: $0.36, versus $0.33
• Adjusted EPS: $0.38
• Gas segment revenue: $122.6 million, up 13.0%
• 2026 infrastructure investment plan: $1.7 billion

Sources

1. Essential Utilities Form 8-K with third-quarter 2026 earnings release, filed Nov. 4, 2026 (accession 0001552781-26-000537)

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