American Water Works pany(AWK) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Earnings per share (EPS) for Q3 2023 were $1.66, up from$1.63 in Q3 2022, while year-to-date EPS increased to $4.03 from$3.70 in the same period last year [7][22] - The estimated net favorable weather impact year-to-date in 2023 was approximately $0.11 per share compared to$0.06 per share in 2022 [7][23] - The company reaffirmed its 2023 guidance on a weather-normalized basis, indicating strong execution aligned with growth expectations [7] Business Line Data and Key Metrics Changes - The company invested $1.8 billion in capital projects year-to-date, with a total capital investment planned for 2023 of$2.9 billion, including approximately $400 million for acquisitions [8][14] - The new five-year plan anticipates a capital investment of approximately$16 billion to $17 billion, an increase of about$2 billion over the previous plan [14] Market Data and Key Metrics Changes - The company expects 8% to 9% rate-based growth over the next decade, driven by an accelerated capital expenditure plan and a robust regulated acquisition strategy [10][12] - The military services group is expected to contribute to organic revenue growth from the 18 installations currently served [11] Company Strategy and Development Direction - The company is focused on maintaining a long-term target of 7% to 9% EPS and dividend compounded annual growth rates, with 2024 EPS guidance set at $5.10 to$5.20 [9] - A significant emphasis is placed on customer affordability, with a target for residential water bills to remain at 1% or less of median household income [19][20] - The company is advocating for equal access to federal and state funding for PFAS treatment and is focused on regulatory execution [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering consistent earnings and dividend growth over the next five years, despite short-term impacts from higher interest rates [12][13] - The company believes its low-risk capital investment plan and focus on customer affordability will continue to attract investor interest [13][35] Other Important Information - The company completed 14 acquisitions totaling $36 million in the first nine months of 2023, with 32 transactions under agreement totaling$611 million [26] - The total debt-to-capital ratio as of September 30 was 54%, comfortably within the long-term target of less than 60% [33] Q&A Session Summary Question: CapEx revision and bill outlook - Management highlighted a sharpened focus on customer affordability and the importance of maintaining bills at 1% or less of household income while managing capital investments [40][42] Question: Financing plan and operating cash flow - The increase in operating cash flow is attributed to the significant step-up in capital spending, which is expected to drive higher cash flows in the interim years [44][45] Question: Growth triangle and financing plan - Management confirmed that the growth triangle remains unchanged, emphasizing that rate-based growth continues to drive overall growth metrics [47][48] Question: PFAS-related financial liability - Management is actively engaged in ensuring water systems are protected from financial liabilities related to PFAS and is advocating for timely recovery of associated costs [80][82] Question: Equity needs and timing - The company plans to issue approximately $1 billion of equity from 2024 to 2028, with the timing dependent on market conditions [31][84]