Essential Utilities Rides on Investments & Expanding Customer Base

Essential Utilities WTRG continues to benefit from contributions from acquired assets, organic ventures and capital expenditures. These initiatives will collectively strengthen and expand water and wastewater operations. 

However, this Zacks Rank #3 (Hold) company faces risks related to water contamination and weather fluctuation.

Factors Acting in Favor of WTRG

Essential Utilities continues to make systematic investments to strengthen its water, wastewater and natural gas infrastructure. It plans to invest $7.8 billion from 2025 to 2029 to improve the water and natural gas systems and better serve customers using enhanced information technology. The company plans to invest $1.4-$1.5 billion in its infrastructure in 2025.

The majority of the water distributed by the company is self-sourced and lesser dependence on outside sources makes its business more stable.  It is committed to reducing emissions from natural gas, water and wastewater operations and aims to reduce annual Scope 1 and 2 emissions by 60% by 2035 compared to 2019 levels. This initiative can help the company lower its operational costs by focusing on new and advanced assets.

Since 2015, Essential Utilities has expanded utility operations by completing many water and wastewater acquisitions, adding more than 129,000 customers. Essential Utilities’ pending five acquisitions, when completed, will add more than 210,000 customers to its existing base. The company is pursuing water and wastewater acquisition opportunities in its service territories, which collectively serve more than 400,000 customers.

Challenges Faced by WTRG

Water utilities always run the risk of water contamination supplied to their customers, despite implementing the best safety measures. Contaminated water could result in disruptions to water services and incur additional costs for water quality testing and monitoring, treatment of the contaminated source, or the purchase of alternative water supplies.

If the weather is cooler in winter months and its service areas receive more rainfall than normal, the demand for water will fall, and the company’s performance will be adversely impacted.

WTRG’s Stock Price Performance

In the past six months, shares of the company have risen 3.8% compared with the industry’s 17.6% growth.

Stocks to Consider

Some better-ranked stocks from the same industry are Artesian Resources ARTNA, sporting a Zacks Rank #1 (Strong Buy) at present, and American Water Works AWK and California Water Service Group CWT both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ARTNA’s 2025 earnings per share (EPS) is pinned at $2.16, indicating year-over-year growth of 9.1%. The company delivered an average earnings surprise of 18.6% in the last four quarters. 

AWK’s long-term (three to five years) earnings growth rate is 7.4%. The Zacks Consensus Estimate for 2025 EPS is pinned at $5.71, indicating year-over-year growth of 5.9%.

CWT’s long-term earnings growth rate is 8.78%. The company delivered an average earnings surprise of 57.9% in the last four quarters. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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