8-K: American States Water Company Reports Mixed First Quarter Results, Impacted by Prior Year Adjustments

American States Water Company's first quarter 2024 earnings per share were $0.62, down from $0.93 in the same period last year, but up $0.02 on an adjusted basis.

Summary

• American States Water Company (AWR) announced its first quarter 2024 earnings, reporting a basic and fully diluted earnings per share of $0.62, compared to $0.93 for the same quarter in 2023.
• The decrease of $0.31 per share is primarily due to the impact of a water general rate case and estimated revenues subject to refund recorded in the first quarter of 2023.
• Excluding these items, adjusted consolidated diluted earnings per share increased by $0.02, from $0.60 in Q1 2023 to $0.62 in Q1 2024.
• The water segment's adjusted earnings per share increased by $0.07, or 17.1%, driven by rate increases and higher customer usage.
• The electric segment saw a decrease of $0.01 per share due to the lack of new rates while awaiting a decision on the electric general rate case.
• The contracted services segment's earnings decreased by $0.02 per share due to a decrease in construction activity, but is expected to contribute $0.50 to $0.54 per share for the full year 2024.
• AWR's parent company experienced a $0.01 per share increase in losses due to higher interest expenses.
• The company's board approved a second quarter dividend of $0.43 per share, payable on June 3, 2024.
• AWR has increased its dividend for 69 consecutive years, with a compound annual growth rate of 9.4% over the last five years.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the adjusted earnings increase and strong dividend history, but tempered by the decrease in reported earnings and challenges in the electric and contracted services segments.

Positives

• Adjusted consolidated diluted earnings per share increased by $0.02 year-over-year.
• The water segment's adjusted earnings per share increased by 17.1% due to rate increases and higher customer usage.
• The contracted services segment expanded its operations by adding two new military bases.
• The company has a long history of increasing dividends, with 69 consecutive years of increases.
• The company's dividend rate has grown at a compound annual growth rate of 9.4% over the last five years.

Negatives

• Reported earnings per share decreased by $0.31 compared to the first quarter of 2023.
• The electric segment's earnings decreased by $0.01 per share due to the lack of new rates.
• The contracted services segment's earnings decreased by $0.02 per share due to a decrease in construction activity.
• AWR's parent company experienced increased losses due to higher interest expenses.

Risks

• The electric segment is awaiting a decision on its general rate case, which could impact future earnings.
• The contracted services segment's earnings are subject to fluctuations in construction activity.
• AWR's parent company is exposed to risks associated with interest rate fluctuations and borrowing levels.
• The company's future performance is subject to regulatory decisions and market conditions.

Future Outlook

The contracted services segment is expected to contribute $0.50 to $0.54 per share for the full 2024 year. The electric segment is awaiting a decision on its general rate case, which is expected to be retroactive to January 1, 2023.

Management Comments

• Robert Sprowls, president and chief executive officer, and Eva Tang, senior vice president and chief financial officer, will host a conference call to discuss these results.
• The company uses earnings per share by business segment as an important measure in evaluating its operating results.

Industry Context

The utility sector is heavily regulated, and AWR's results are significantly impacted by regulatory decisions, particularly rate cases. The company's expansion into contracted services for military bases is a notable trend in the industry, as is the focus on consistent dividend growth.

Comparison to Industry Standards

• AWR's dividend growth of 9.4% CAGR over the last five years is strong compared to many utility companies, which often have lower growth rates.
• The company's 69 consecutive years of dividend increases places it in an exclusive group of companies on the New York Stock Exchange.
• The water segment's 17.1% adjusted earnings increase is a positive sign, but the electric segment's performance is lagging due to the pending rate case, which is not uncommon in the utility sector.
• Companies like California Water Service Group (CWT) and SJW Group (SJW) are comparable in the water utility space, and their performance is also heavily influenced by regulatory decisions and rate cases.
• In the contracted services space, companies like Veolia and Suez are larger players, but AWR's focus on military bases provides a niche market.

Stakeholder Impact

• Shareholders will receive a second quarter dividend of $0.43 per share.
• Customers of the water utility segment may see changes in their rates due to the rate case decisions.
• Employees may be impacted by changes in labor costs and benefits.
• The company's performance impacts its creditors and suppliers.

Next Steps

• The company will hold a conference call on May 8, 2024, to discuss the results.
• The electric segment is awaiting a decision on its general rate case.
• The company will continue to operate and expand its contracted services segment.

Key Dates

Keywords

earnings, water utility, electric utility, contracted services, dividends, rate case, financial results, American States Water Company, AWR