American States Water (AWR) Q2 EPS Up 2%

American States Water (AWR 2.19%), the regulated utility and contracted services provider, released its results for Q2 2025 on August 6, 2025, covering performance for the period ended June 30. The company reported diluted earnings per share (GAAP) of $0.87, missing GAAP analyst estimates of $0.91. Revenue (GAAP) reached $163.1 million, falling short of GAAP expectations of $170.64 million.

GAAP EPS increased by $0.02 per share compared to Q2 2024.

While the company continued to show growth in core utility operations, it faced softness in contracted services and experienced the impact of regulatory changes. Overall, it was a mixed quarter that put a spotlight on both operational progress and sources of risk for the periods ahead.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About American States Water and Its Recent Focus

The company serves as a regulated utility supplying water and electricity to customers in California through its subsidiaries, and also provides contracted utility services to U.S. military bases through its contracted services business. Operations are shaped by decisions from state regulators, particularly the California Public Utilities Commission (CPUC), which oversees rates, capital spending, and compliance requirements.

In recent years, the company has concentrated on expanding its regulated base, investing in water and electric infrastructure, and meeting evolving climate and environmental standards. Major success factors include regulatory outcomes, the stability of its government contracts, and the ability to respond to demand from customers amid climate change and environmental regulations. The transition to new regulatory models, like the Monterey-style Water Revenue Adjustment Mechanism (M-WRAM), has introduced new earnings risks as fluctuations in water consumption directly affect revenue and profits.

Quarter Highlights: Segment Performance, Financials, and Strategic Actions

During the quarter, the water utility segment remained the largest business driver, benefiting from a $9.3 million increase in water operating revenues due to CPUC-approved rate hikes effective January 1, 2025. Earnings from water operations climbed $0.06 per share compared to Q2 2024. However, Water supply costs increased $4.2 million due to a rise in per-unit water supply prices. The company now operates under M-WRAM, which makes future results more sensitive to swings in customer usage and supply mix than in past periods. Management highlighted that this structure could introduce more volatility to earnings in future quarters.

The electric utility segment posted revenue growth of 48.7% for the quarter ended June 30, 2025, compared to the prior year.

This surge followed the receipt of CPUC approval for new rates and the inclusion of wildfire mitigation costs in customer rates. Diluted segment earnings improved to $0.03 per share, $0.02 higher than last year (GAAP). Nonetheless, expenses continued to rise, particularly for vegetation management and services tied to regulatory compliance, limiting the immediate boost to earnings from the increased rates.

Contracted services, which provide water and wastewater management for U.S. military bases, experienced a sharp slowdown in activity.

Operating revenue dropped $5.8 million, or 16%, compared to Q2 2024, as construction activity declined due to the timing of projects.

Segment diluted earnings per share for contracted services fell $0.06 to $0.13 (GAAP). The company continues to expect this segment to contribute $0.59 to $0.63 per share for full year 2025. In addition, higher general operating costs affected the bottom line, partly offset by increased management fees and lower interest expense.

This period saw the completion of an agreement to own and operate the water and wastewater system for a new planned community, expected to reach 1,300 service connections at full build-out by 2034. The regulated utility was authorized to invest nearly $650 million in capital improvements in connection with general rate cases approved in early 2025, with $170–$210 million targeted for capital investments this year. On the capital front, 1.48 million new shares were issued through June 30, 2025, under an at-the-market program, resulting in some per-share earnings dilution. Standard & Poor’s affirmed the company’s “A” credit rating with a stable outlook.

The quarter also continued the company’s record of dividend growth, marking the 71st consecutive year of annual increases, as the board declared an 8.3% quarterly dividend increase to $0.5040 per share. This marks the seventy-first consecutive year of dividend increases for AWR's dividend payments through 2025. Over the last five years, the dividend’s compound annual growth rate has reached 8.5%.

Looking Ahead: Guidance and Areas to Watch

Management reaffirmed guidance for the contracted services segment, projecting a full-year EPS contribution of $0.59 to $0.63 for 2025.

The company is on target to spend $170 to $210 million this year.

The company did not provide consolidated EPS or revenue guidance for the remainder of the year.

For upcoming quarters, investors should keep an eye on the effects of the transition to the incremental balancing mechanisms and M-WRAM, and the timing of contracted services construction revenue. The additional share issuance could continue to affect per-share growth, while regulatory and climate-driven pressures remain active risks. Any future rate decisions or major contract awards—particularly in the government services business—could alter the forward outlook for the company.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.