Earlier this month, water utility giant American Water Works released solid third-quarter 2020 results. Revenue increased 6.5% year over year to $1.08 billion and earnings per share (EPS) rose 9.8% to $1.46, easily beating the $1.38 Wall Street had been expecting.
Earnings releases only tell part of the story. Management’s comments during analyst earnings calls often reveal key insights about a company’s business performance, prospects, and strategy. Below are three key things American Water’s management shared on the Q3 call that investors should know. [Transcript via Seeking Alpha.]
For context, in 2020, shares of American Water have returned 27.1% through Nov. 27. That’s nearly double the S&P 500 index’s 14.5% return over this period.
Global warming is benefiting the company
From CEO Walter Lynch’s remarks:
Also included in the [Q3] results is an estimated $0.06 per share favorable impact in 2020 from hotter, drier weather across some of our regulated states. […] We’re increasing our 2020 earnings [guidance] range to $3.87 to $3.93 per share up from $3.79 to $3.89 per share. This reflects the favorable weather in the quarter.
Residential water consumption increases when weather is hotter and dryer than usual. People drink more water to stay hydrated and they use more water on their lawns and gardens. Moreover, such weather also results in a rise in agricultural water use.
