American Water Works Co. (NYSE:AWK) is slated to release its first-quarter 2019 results after the market closes on Wednesday, May 1.  

Shares of the largest publicly traded U.S. water and wastewater utility have returned 27.9% for the one-year period through April 23.

For context, the S&P 500 has returned 12.1% over this period. Shares of the second- and third-largest publicly traded water utilities that operate in the United States, Aqua America (NYSE:WTR) and American States Water (NYSE:AWR), have returned 13.4% and 27.1%, respectively, over the last 12 months.

Here's what to watch in American Water's report.

Woman dressed in athletic wear drinking from a water bottle with blue sky in background.

Image source: Getty Images.

Key numbers

Here are American Water's year-ago results and Wall Street's estimates to use as benchmarks.

Metric

Q1 2018 Result

Wall Street's Q1 2019 Consensus

Wall Street's Projected Growth (YOY)

Revenue

$761 million

$784.1 million

3%

Adjusted EPS

$0.59

$0.62

5.1%

EPS = earnings per share. YOY = year over year. Data sources: American Water Works and Yahoo! Finance. 

American Water is approaching its earnings report on a solid note with respect to its 2018 performance and earnings beats. Last year, its revenue edged up 2.5% year over year to $3.44 billion, EPS soared 32.4% to $3.15, and adjusted EPS jumped 8.9% to $3.30. 

In 2018, the water utility giant surpassed the Street's consensus earnings estimate in three quarters and met expectations in the other quarter. While these beats were small, they're still somewhat notable because results for regulated water utilities are usually very predictable.

For context, Aqua America beat analysts' expectations in two of its four quarters -- though by a lower average percentage than American Water did -- while American States fell short of the earnings consensus in three of four quarters.

O&M efficiency ratio

Investors should continue to watch American Water's operation and maintenance (O&M) efficiency ratio. This ratio, which is for the lagging one-year period, reflects how well the company is controlling costs in its regulated business. (The lower the ratio, the better.)

Last quarter, this ratio ticked up slightly -- meaning efficiency slightly declined -- to 35.6%, from 35.3% in the year-ago period. As I wrote after last quarter's results were released: 

The company said the slight deterioration in this ratio was "primarily due to additional expense from a settlement of litigation in our New York subsidiary and higher expenses incurred from colder weather experienced during the first quarter of 2018." At this point, the slide in the efficiency ratio appears to be just a blip, as it's been improving for some time. This ratio was higher than 44% in 2010. American Water's goal is to achieve 31.5% by 2023.

Dividend hike of 9.9% recently announced

Last week, American Water raised its quarterly cash dividend from $0.455 to $0.50 per share, a 9.9% increase. The company has increased its dividend every year since it went public in April 2008. 

American Water aligns its dividend hikes to earnings growth and targets a payout ratio between 50% to 60% of net income.

The stock's dividend yield is 1.75%, as of its closing price on April 23. 

2019 guidance

Last quarter, American Water CEO Susan Story reaffirmed the company's previously issued 2019 EPS guidance of $3.54 to $3.64. This represents growth in the range of 7.3% to 13.3%, or 10.3% at the midpoint, over its 2018 adjusted EPS.