Essential Utilities Q3 EPS Hits $0.36 as American Water Merger Nears

Essential Utilities, Inc. (NYSE: WTRG) reported third-quarter 2026 GAAP net income of $103.8 million, or $0.36 per diluted share, on November 3, 2026, up from $92.1 million and $0.33 in the same quarter of 2025. Adjusted earnings per share, which strips out costs tied to the pending merger with American Water, came in at $0.38. Quarterly revenue reached $508.3 million, a 6.6% increase year over year.

Context — why this matters now

The company said the quarter reflects "consistent earnings growth generated by both our water and natural gas divisions," a claim that matters because Essential is simultaneously running a regulated utility and negotiating a merger that would fold it into American Water. Investors pricing WTRG are effectively pricing two things: standalone operating momentum and the probability the deal closes on the timeline management has given.

Management reiterated that it continues to expect the merger to close in the first quarter of 2027. That is the same window the company previously guided, so the update is a confirmation rather than a revision. Regulatory approval has already been secured from commissions in Kentucky, Ohio and Virginia. Settlement agreements have been reached with regulators in Pennsylvania, North Carolina and Texas, though each still requires review and approval by the applicable public utility commission.

The comparable the report itself provides is the prior-year quarter: GAAP EPS of $0.33 and net income of $92.1 million. The $0.03 per-share improvement and the 6.6% revenue gain frame the operating trend independent of merger noise.

What changed in the quarter was cost. Operations and maintenance expenses fell to $152.2 million from $153.1 million, a 0.6% decline. Excluding merger-related costs, O&M dropped by $5.9 million. The company attributed the decline primarily to insurance recoveries recognized in the quarter and lower bad debt expense in the regulated natural gas segment.

Data — what the numbers show

The headline figures move in one direction: revenue up, GAAP earnings up, adjusted earnings up. Revenue rose from $477.0 million to $508.3 million. GAAP net income rose from $92.1 million to $103.8 million. Adjusted income, the non-GAAP measure, was $107.4 million after adding back $4.9 million of merger costs and subtracting $1.3 million of related tax impact.

The segment split explains where growth came from. Regulated water revenue rose 4.5% to $380.6 million from $364.1 million, driven by regulatory recoveries and a larger customer base. Regulated natural gas revenue climbed to $122.6 million from $108.5 million on higher rates and surcharges, increased purchased gas costs, and favorable customer usage.

Metric	Q3 2026	Q3 2025	Change
Revenue	$508.3M	$477.0M	+6.6%
GAAP net income	$103.8M	$92.1M	+12.8%
GAAP diluted EPS	$0.36	$0.33	+$0.03
Adjusted diluted EPS	$0.38	n/a	n/a
O&M expenses	$152.2M	$153.1M	-0.6%

Through the first nine months, revenue rose 7.1% to $1,900.9 million from $1,775.5 million. Nine-month net income fell to $434.0 million, or $1.53 per share, from $483.7 million, or $1.73 per share. The decline reflects $22.5 million of merger-related expenses booked through the third quarter. Nine-month diluted non-GAAP EPS was $1.58.

Financing costs are visible in the income statement. Interest expense for the quarter rose to $91.3 million from $82.3 million. As of September 30, 2026, the weighted average cost of fixed-rate long-term debt was 4.14%, and the company had $759 million available on its credit lines.

Analysis — what it means for markets

The results land in a utility sector where the investment case rests on rate-base growth and regulatory predictability rather than demand surprises. Essential invested roughly $1.1 billion in infrastructure in the first nine months of 2026 and said it remains on track to invest $1.7 billion for the full year. That spending is the engine behind future rate cases, and it is also the reason interest expense is climbing.

Rate activity supports the forward revenue picture. So far in 2026, the regulated water segment received rate awards or infrastructure surcharges expected to add $53.6 million in annual revenue across Pennsylvania, Indiana, Illinois, Ohio, North Carolina and New Jersey. The natural gas segment received awards or surcharges in Pennsylvania and Kentucky worth $16.9 million. Pending cases could add more: water and wastewater filings in Texas, Virginia, Illinois, Indiana and New Jersey seek an estimated $78.5 million in incremental annual revenue, while a Pennsylvania natural gas case requests $163.2 million.

The counter-argument is that pending cases are requests, not outcomes. The company did not disclose the terms of its settlements beyond the fact that they exist, and regulators can approve less than what was requested. A second risk sits in the merger itself: the deal still requires final commission sign-off in several states, and any delay pushes the Q1 2027 close date.

For positioning, WTRG trades as a regulated utility with a merger catalyst, so the shareholder base skews toward income and event-driven funds rather than momentum. The dividend is the anchor. On October 21, 2026, the board declared a quarterly dividend of $0.3606 per share, payable December 1 to holders of record on November 10. The company said it has paid consecutive quarterly cash dividends for over 80 years and raised the payout 36 times in the last 35 years.

Outlook — what to watch next

Three items matter from here. First, the remaining public utility commission rulings on the Pennsylvania, North Carolina and Texas settlements, which are the last regulatory steps before the merger can close. Second, the pending rate cases, particularly the $163.2 million Pennsylvania natural gas request tied to the company's Long-Term Infrastructure Improvement Plan. Third, the November 4 earnings call, where management may update the capital plan and merger timeline.

On the operating side, the company said that excluding one-time items and the impact of abnormal weather, full-year O&M expenses are expected to be in line with historic norms. That guidance implies the third-quarter insurance recoveries are not a recurring benefit, and investors should read the $5.9 million O&M decline in that light.

The acquisition pipeline is a secondary catalyst. Essential said it has signed asset purchase agreements totaling approximately $290 million in purchase price, expected to serve over 208,000 customers or equivalent dwelling units. That includes a $276.5 million agreement to acquire DELCORA, a Pennsylvania sewer authority serving roughly 198,000 equivalent dwelling units. Since 2015, the company said it has acquired about $570 million in rate base and added more than 138,000 new customers or equivalent dwelling units.

Frequently Asked Questions

What does the American Water merger mean for Essential Utilities shareholders?

The company has said it expects the merger to close in the first quarter of 2027, subject to remaining regulatory approvals. Approvals are already in hand in Kentucky, Ohio and Virginia, and settlements have been reached with regulators in Pennsylvania, North Carolina and Texas. Shareholders will not receive merger consideration until closing; until then, WTRG continues to trade and pay its quarterly dividend of $0.3606 per share.

Why did Essential Utilities' nine-month net income fall despite higher revenue?

Revenue rose 7.1% to $1,900.9 million in the first nine months, but net income fell to $434.0 million from $483.7 million. The company attributed the gap to $22.5 million of merger-related expenses booked through the third quarter, plus higher interest expense and a swing in income tax expense. Adjusted diluted EPS for the period was $1.58, excluding those merger costs.