Earnings per share of $0.97 for Q1 2024 vs.
$0.72 for Q1 2023 Closes sale of non-core energy projects
Essential Utilities Inc. (NYSE: WTRG) today reported results for
the first quarter ended March 31, 2024. Essential’s net income of
$265.8 million or $0.97 per share for the first quarter of 2024
compared favorably to $191.4 million or $0.72 per share reported
for the first quarter of 2023.
“Although our gas footprint experienced warmer than normal
winter weather in Q1 2024, we remain focused on and expect to post
strong results for the year,” said Essential Utilities Chairman and
Chief Executive Officer Christopher Franklin. “In Q1 2024, the
company completed the $165 million sale of its three non-utility
microgrid and district energy projects in Pittsburgh. The proceeds
were used to finance Essential’s capital expenditures in place of
external funding from equity and debt issuances.”
First Quarter 2024 Operating Results
Essential reported net income of $265.8 million and earnings per
share of $0.97 for the first quarter of 2024, which includes a
one-time gain of $91.2 million, net of transaction-related
expenses, or $66.0 million after-tax for the $165 million sale of
the three energy projects, compared to net income of $191.4 million
and earnings per share of $0.72 for the same period in 2023.
Comparing this quarter’s earnings to those of Q1 2023, increased
revenues from regulatory recoveries, regulated water segment
customer growth, higher regulated natural gas segment and water
segment volumes, and other items, which includes the gain on sale,
were offset by a slight increase in expenses.
Revenues for the quarter were $612.1 million compared to $726.5
million in the first quarter of 2023, a decrease of 15.7%. Lower
purchased gas costs and other items were the primary contributors
to the decrease in revenues for the quarter, which were offset by
additional revenues from regulatory recoveries, customer growth
from the regulated water segment, and higher regulated natural gas
segment and water segment volumes. Non-weather-impacted commercial
and industrial customers’ gas volumes increased compared to Q1
2023, while warmer weather significantly impacted residential
volumes, resulting in a shortfall relative to normal usage, similar
to the impact of unusually warm weather in Q1 2023. Operations and
maintenance expenses decreased to $136.9 million for the first
quarter of 2024 compared to $138.0 million in the first quarter of
2023.
Essential’s regulated water segment reported revenues for the
quarter of $279.9 million, an increase of 4.7% compared to $267.3
million in the first quarter of 2023. Rates and surcharges and
customer growth were the largest contributors to the increase in
revenues for the period. Operations and maintenance expenses for
Essential’s regulated water segment increased to $90.7 million for
the first quarter of 2024 compared to $82.8 million in the first
quarter of 2023, driven partially by favorable impacts last
year.
Essential’s regulated natural gas segment reported revenues for
the quarter of $324.3 million, compared to $441.3 million in the
first quarter of 2023. Due mainly to lower commodity prices,
purchased gas costs were $125.5 million for the quarter as compared
to $241.9 million for the same quarter in 2023. As a result, the
recovery of lower purchased gas costs was the largest driver in the
decrease of revenues. Operations and maintenance expenses for
Essential’s regulated natural gas segment decreased to $45.9
million for the first quarter of 2024 compared to $57.2 million in
the first quarter of 2023, impacted positively by the sale of the
energy projects and the West Virginia utility assets.
Dividend
As previously announced on February 21, 2024, Essential’s board
of directors declared a quarterly cash dividend of $0.3071 per
share of common stock. This dividend will be payable on June 1,
2024, to shareholders of record on May 10, 2024. The company has
paid a consecutive quarterly cash dividend for more than 79
years.
Financing
As of March 31, 2024, Essential’s weighted average cost of
fixed-rate long-term debt was 3.99%, and the company had $1,073.2
million available on its credit lines.
Rate Activity
As of May 1, 2024, the company’s regulated water segment
received rate awards or infrastructure surcharges in Illinois,
North Carolina, Ohio, and Pennsylvania of $13.7 million, and its
regulated natural gas segment received infrastructure surcharges in
Kentucky and Pennsylvania of $1.0 million. The company currently
has base rate cases or infrastructure surcharges pending in
Illinois, New Jersey, Texas, and Virginia for its regulated water
segment, which combined would add an estimated $43.2 million in
incremental annual revenues, and a base rate case pending in
Pennsylvania for its regulated natural gas segment for an estimated
$156.0 million in incremental annual revenues.
Capital Expenditures
Essential invested approximately $253.0 million in the first
three months of 2024 to improve its regulated water and natural gas
infrastructure systems and to enhance customer service across its
operations. The company continues to be a leader in the country at
replacing miles of aged underground utility pipe and is committed
to maintaining elevated levels of infrastructure investment. The
company is on track to invest between $1.3 to $1.4 billion in
needed infrastructure investments in 2024. From 2024 through 2028,
the company plans to invest approximately $7.2 billion to improve
water and natural gas systems and better serve customers through
improved information technology. Essential’s investments during
this five-year period include addressing PFAS with at least $450
million in capital projects, replacing and expanding its water and
wastewater utility infrastructure, and replacing and upgrading its
natural gas utility infrastructure, with the latter leading to
significant reductions in methane emissions that occur in aged gas
pipes. The company is a leader in remediating PFAS and will comply
with the recently finalized EPA rule. The capital investments made
to rehabilitate and expand the infrastructure of the communities’
Essential serves are critical to its mission of safely and reliably
delivering Earth’s most essential resources.
Water Utility Growth by Acquisition
Essential’s continued growth by acquisition allows the company
to provide safe and reliable water and wastewater service to an
even larger customer base than it could from organic customer
growth alone.
The company has six signed purchase agreements for additional
wastewater systems in Pennsylvania and Illinois that are pending
closing and are expected to serve over 215,000 customers or
equivalent dwelling units and total approximately $385 million in
purchase price. The company’s $276.5 million agreement to acquire
the Delaware County Regional Water Quality Control Authority
(DELCORA), a Pennsylvania sewer authority that serves approximately
198,000 equivalent dwelling units in the Philadelphia suburbs, is
included among these signed purchase agreements.
The pipeline of potential water and wastewater municipal
acquisitions the company is actively pursuing represents
approximately 400,000 total customers.
2024 Financial and Growth Guidance
Essential updates its guidance from previously announced:
- In February, we provided guidance for 2024 net income per
diluted common share to be $1.96 to $2.00. Due to the first quarter
2024 results, we anticipate exceeding this 2024 guidance as a
result of the gain on sale of the energy plant assets, despite the
warmer-than-normal weather that resulted in lower regulated natural
gas operating revenues
- In 2024, regulated infrastructure investments will be
approximately $1.3 to $1.4 billion
- Through 2028, we will make regulated infrastructure investments
of approximately $7.2 billion, weighted towards the regulated water
segment
- Through 2028, the regulated water segment rate base will grow
at a compounded annual growth rate of approximately 8%
- Through 2028, the regulated natural gas segment rate base will
grow at a compounded annual growth rate of approximately 10%
- Through 2028, the regulated utility rate base will grow at a
compounded annual growth rate of over 8%
- The regulated water customer base (or equivalent dwelling
units) of the business will grow at an average annual growth rate
of between 2 and 3% from acquisitions and organic customer
growth
- The regulated natural gas customer base of the business will be
stable for 2024
- In 2024, approximately $250 million in equity is expected to be
raised using an ATM equity program
Sustainability Guidance and Commitments
- Reduction of Scope 1 and Scope 2 greenhouse gas emissions by
60% by 2035 from the company’s 2019 baseline
- Multiyear plan to ensure that finished water does not exceed
the EPA regulation published recently for PFOA, PFOS, PFHxS, PFNA,
and HFPO-DA contaminants
Essential reaffirms its commitment to substantially reduce Scope
1 and 2 greenhouse gas emissions by 2035. The company plans to
achieve these reductions through extensive gas pipeline
replacement, the purchase of renewable energy, accelerated methane
leak detection and repair, and various other planned initiatives.
In addition, Essential reaffirms its commitment to providing
finished water that will meet the EPA regulation regarding PFAS
published in April.
Guidance Assumptions
Essential Utilities does not guarantee future results of any
kind. Guidance is subject to risks and uncertainties, including,
without limitation, those factors outlined in the “Forward Looking
Statements” of this release and the “Risk Factors” section of the
company’s annual and quarterly reports filed with the Securities
and Exchange Commission.
The earnings per share, infrastructure investment and rate base
guidance includes the signed municipal water and wastewater
acquisitions for which the company has entered into signed purchase
agreements as of the date the guidance was announced but does not
include DELCORA or other potential municipal acquisitions from the
company’s list of acquisition opportunities that currently
represents over 400,000 customer equivalents. The average annual
regulated water segment growth guidance reflects the company’s
proven acquisition track record of adding nearly 129,000 customers
or equivalent dwelling units and over $500 million in rate base
since 2015, its current backlog of approximately $385 million of
signed pending acquisitions with over 215,000 equivalent customers,
and the current acquisition landscape.
The company’s guidance includes the expectation that the company
will continue to issue equity and debt on an as needed basis to
support acquisitions and capital investment plans.
First Quarter 2024 Earnings Call Information Date: May 3,
2024 Time: 11 a.m. EDT (please dial in by 10:45 a.m.) Webcast and
slide presentation link:
https://www.essential.co/events-and-presentations/events-calendar
Replay Dial-in #: 866.583.1035 (U.S.) & International callers
can find their dial in here Confirmation code: 4938576
The company’s conference call with financial analysts will take
place on Friday, May 3, 2024, at 11 a.m. Eastern Daylight Time. The
call and presentation will be webcast live so interested parties
may listen over the internet by logging on to Essential.co and
following the link for Investors. The conference call will be
archived in the Investor Relations section of the company’s website
for 90 days following the call. Additionally, the call will be
recorded and made available for replay at 2 p.m. on May 3, 2024,
for 10 business days following the call. To access the audio replay
in the U.S., dial 866.583.1035 (pass code 4938576). International
callers can find their dial in number here (pass code 4938576).
About Essential
Essential Utilities, Inc. (NYSE: WTRG) delivers safe, clean,
reliable services that improve quality of life for individuals,
families, and entire communities. With a focus on water, wastewater
and natural gas, Essential is committed to sustainable growth,
operational excellence, a superior customer experience, and premier
employer status. We are advocates for the communities we serve and
are dedicated stewards of natural lands, protecting more than 7,600
acres of forests and other habitats throughout our footprint.
Operating as the Aqua and Peoples brands, Essential serves
approximately 5.5 million people across nine states. Essential is
one of the most significant publicly traded water, wastewater
service and natural gas providers in the U.S. Learn more at
www.essential.co.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which generally include words such as “believes,” “expects,”
“intends,” “anticipates,” “estimates,” and similar expressions. The
Company can give no assurance that any actual or future results or
events discussed in these statements will be achieved. Any
forward-looking statements represent its views only as of today and
should not be relied upon as representing its views as of any
subsequent date. Readers are cautioned that such forward-looking
statements are subject to a variety of risks and uncertainties that
could cause the company’s actual results to differ materially from
the statements contained in this release. Such forward-looking
statements include, among others: the guidance range of net income
per diluted common share; the anticipated amount of capital
investment in 2024 through 2028; the rate base growth of company
through 2028; the reduction of Scope 1 and Scope 2 greenhouse gas
emissions by 60% by 2035 from the company’s 2019 baseline; the
annual average capital investment per year; the rate base growth
from its organic capital investment program through 2028; its plan
to raise approximately $250 million in equity through the
At-The-Market equity program; the Company’s water utility customer
base growth at an average annual long term growth rate of between
2-3% for acquisitions and organic customer growth; the stability of
the Company’s regulated natural gas customer base in 2024; the
Company’s water utility compounded growth rate of 8%; and, the
Company’s gas utility compounded growth rate of 10%. There are
important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking
statements including: disruptions in the global economy; potential
disruptions in the supply chain for raw and finished materials; the
continuation of the company's growth-through-acquisition program;
general economic business conditions; the company’s ability to
raise additional equity, including on an as needed basis; housing
and customer growth trends; unfavorable weather conditions; the
success of certain cost-containment initiatives; changes in
regulations or regulatory treatment; the company’s ability to
successfully close municipally owned systems presently under
agreement and successfully complete other acquisitions and
dispositions; and other factors discussed in our Annual Report on
Form 10-K and our Quarterly Reports on Form 10-Q, which are filed
with the Securities and Exchange Commission. For more information
regarding risks and uncertainties associated with Essential's
business, please refer to Essential's annual, quarterly, and other
SEC filings. Essential is not under any obligation - and expressly
disclaims any such obligation - to update or alter its
forward-looking statements whether as a result of new information,
future events or otherwise.
WTRGF
Essential Utilities, Inc. and Subsidiaries Selected Operating Data
(In thousands, except per share amounts) (Unaudited)
Quarter Ended
March
31,
2024
2023
Operating revenues
$
612,069
$
726,450
Operations and maintenance expense
$
136,900
$
137,994
Net income
$
265,772
$
191,434
Basic net income per common share
$
0.97
$
0.72
Diluted net income per common share
$
0.97
$
0.72
Basic average common shares outstanding
273,377
264,192
Diluted average common shares outstanding
273,738
264,751
Essential Utilities, Inc. and Subsidiaries Consolidated Statement
of Operations (In thousands, except per share amounts) (Unaudited)
Quarter Ended
March
31,
2024
2023
Operating revenues
$
612,069
$
726,450
Cost & expenses: Operations
and maintenance
136,900
137,994
Purchased gas
129,675
256,315
Depreciation
88,716
82,923
Amortization
1,088
871
Taxes other than income taxes
25,024
22,878
Total
381,403
500,981
Operating income
230,666
225,469
Other expense (income): Interest
expense
73,273
72,668
Interest income
(989
)
(819
)
Allowance for funds used during construction
(4,681
)
(5,688
)
Gain on sale of other assets
(91,625
)
(249
)
Other
(442
)
(240
)
Income before income taxes
255,130
159,797
Provision for income taxes (benefit)
(10,642
)
(31,637
)
Net income
$
265,772
$
191,434
Net income per common share:
Basic
$
0.97
$
0.72
Diluted
$
0.97
$
0.72
Average common shares outstanding:
Basic
273,377
264,192
Diluted
273,738
264,751
Essential Utilities, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (In thousands of dollars) (Unaudited)
March 31,
December 31,
2024
2023
Net property, plant and equipment
$
12,255,585
$
12,097,072
Current assets
419,534
491,979
Regulatory assets and other assets
4,379,225
4,252,408
$
17,054,344
$
16,841,459
Total equity
$
6,081,127
$
5,896,183
Long-term debt, excluding current portion, net of debt issuance
costs
6,856,129
6,826,085
Current portion of long-term debt and loans payable
154,747
227,538
Other current liabilities
523,859
570,389
Deferred credits and other liabilities
3,438,482
3,321,264
$
17,054,344
$
16,841,459
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240502018913/en/
Media Contact: David Kralle Communications Media Hotline:
1.877.325.3477 Media@Essential.co Investor Contact: Brian
Dingerdissen Vice President, IR and Treasurer O: 610.645.1191
BJDingerdissen@Essential.co
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