American Water Works (AWK -0.63%) is slated to release its first-quarter 2022 results after the market close on Wednesday, April 27. The top management team of the largest publicly traded U.S. water and wastewater utility is scheduled to hold a conference call with analysts on the following day at 9 a.m. ET.
Investors should know that Susan Hardwick, the company's CFO since mid-2019, was appointed CEO in early February following the resignation of former CEO Walter Lynch. She will be shedding the CFO role once the company finds a permanent replacement. The top management move was prompted by Lynch's apparently unexpected decision to retire.
Over the last year, American Water stock has slightly underperformed the broader market. It's returned 7.3% through April 14 (April 15 was a market holiday), while the S&P 500 index has returned 8% over this period. The stock remains an outperformer for periods of three years and longer.
Here's what to watch in the company's upcoming Q1 report.
Image source: Getty Images.
Key numbers
Here are American Water's results for the year-ago period and Wall Street's estimates to use as benchmarks.
| Metric | Q1 2021 Result | Wall Street's Q1 2022 Consensus Estimate | Wall Street's Projected Change |
|---|---|---|---|
| Revenue | $888 million | $886.3 million | (0.2%) |
| Earnings per share (EPS) | $0.73 | $0.75 | 2.7% |
Data sources: American Water Works and Yahoo! Finance.
For context, in the fourth quarter of 2021, the company's revenue rose 3% year over year to $951 million. That result exceeded the $937.3 million Wall Street consensus estimate. Reported EPS surged 344% to $3.55. This result got a boost of $2.70 per share from American Water's sale of its homeowner services business, reduced by a $0.19-per-share contribution to its charitable foundation from the sale proceeds. Adjusted for one-time items, EPS increased 6.3% to $0.85, which was in line with analysts' projections.
Sales of New York and Michigan subsidiaries
American Water closed on the sales of its regulated utility businesses in New York and Michigan in January and February, respectively. These cash deals were for $608 million and $6 million, respectively.
The company now has regulated operations in 14 states.
Regulated business efficiency
Investors should continue to monitor American Water's adjusted operation and maintenance (O&M) efficiency ratio. This ratio, which is for the trailing year, reflects how well the company is controlling costs in its regulated business. The lower the number, the better.
In the fourth quarter, this ratio was 34.1%, an improvement from 34.3% in the year-ago period.
Guidance
Last quarter, American Water Works affirmed its previously released 2022 earnings guidance and long-term financial targets through 2026. Any changes in guidance could move the stock.
For 2022, management expects earnings in the range of $4.39 to $4.49 per share. For the five-year period through 2026, it projects an EPS compound annual growth rate of 7% to 9%. And it expects its dividend growth through 2026 to average at the high end of the 7% to 10% range.
