American Water Works (AWK) 25Q2 Update

AWK reported 25Q2 EPS of $1.48, up from $1.42 in 24Q2 and matching my estimate of $1.48.  Operating revenues rose 11.1% to $1.28 billion.  Billed water service volumes dropped 3.8% and estimated average prices increased 14.8%.  Military and contract services revenues rose 6.5%.  Operating and maintenance expenses rose 12.4%, with increases again across all cost categories.  Operating income increased 8.9% to $489 million.  Net interest costs rose 15.3%.  Net income increased 4.3% to $205 million.

Management narrowed its 2025 EPS guidance to the high end of its guidance range $5.65-$5.75, including $0.10 of interest income from a Homeowner Services’ seller note that matures in December 2026.

My projections were already within the revised guidance range, so my 2025 EPS estimate is unchanged at $5.75.  My 2026 EPS estimate of $6.21 is also unchanged.  The 2026 EPS represents an increase of 8.0%, which is in the middle of management’s long-term EPS growth target range of 7%-9%.

Since my last report on June 1, AWK’s stock has delivered a total return of 2.0%, underperforming the S&P 500, which is up 7.4%; but its performance is slightly better than the Dow Jones Water Utility Index’s 2.5% price drop.  The stock was a safe haven during the April sell-off, but it has traded sideways with a downward bias since early March.  It has therefore lagged during the market’s strong recovery even though it has modestly outperformed its peer group.

Based upon AWK’s financial performance and my projections, I am maintaining my price target of $152 for its stock.  The price target implies a forward valuation multiple of 24.5 times projected 2026 EPS of $6.21, in line with its current near-term forward multiple (based upon my 2025 EPS estimate of $5.75).  Along with its 2.4% dividend yield, the potential total return is 10.9%.  With the stock’s solid potential total return, but its mediocre technicals, I am maintaining my performance rating of “3” (Neutral).

The company ended the quarter with a debt-to-total capitalization ratio of 57.8%, below its upper limit of 60.0%.  With capital spending expected to remain elevated, my projections show the ratio slightly exceeding 60% by the end of 2026.  Thus, AWK plans to issue equity in a secondary offering sometime during 2026.

This is a summary of my recent update report on American Water Works Company (AWK). To obtain a copy of the report, please reach out to me using the contact information provided below.

August 8, 2025 (Report published on July 31, 2025.)

Stephen P. Percoco
Lark Research
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Linden, New Jersey 07036
(908) 975-0250
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