H2O America

H2O America reported Q2 2026 GAAP diluted EPS of $0.62 and adjusted diluted EPS of $0.72, versus $0.75 adjusted EPS in Q2 2025. Year-to-date 2026 diluted EPS was $1.12 GAAP and $1.23 adjusted, versus $1.25 adjusted in the same period of 2025. Management said first-half adjusted net income grew 17%, but weighted average diluted shares were 19% higher, and the March equity raise reduced EPS by a net $0.06 year to date. Revenue drivers included a $0.30 per share benefit from higher revenues in Q2 and a $0.70 per share benefit in the first half, partially offset by water production and operating expense increases and dilution. For 2026, the company reiterated adjusted diluted EPS guidance of $3.08 to $3.18, expects to stay out of equity markets through at least year-end 2027 barring new M&A, and still expects to raise $100 million to $200 million of debt to fund Quadvest, with strong liquidity and all but $1 million available under $370 million of bank lines.

Andrew Walters emphasized that the quarter was consistent with internal expectations and supportive of the company’s standalone 2026 EPS guidance and long-term growth target. His strategic focus was on disciplined infrastructure investment, constructive regulatory engagement, and closing the transformational Quadvest acquisition, which he said should help drive value beginning in 2028. He also spent significant time on California water-supply affordability, arguing that rising supply costs are unsustainable and that the company is exploring purified water and desalination as longer-term alternatives.

Ann Kelly highlighted that Q2 adjusted EPS of $0.72 was down from $0.75 a year ago, largely because higher revenues were more than offset by water production expense, operating expense, and dilution from equity issuance. She quantified the first-half benefit from higher revenues at $0.70 per share, including $0.41 from rate relief and infrastructure surcharges, and noted that more than 90% of budgeted year-over-year revenue increases have already been approved by regulators. She also said H1 CapEx was $207 million, or 43% of the $483 million budget, and reiterated strong liquidity, the use of the March equity raise to pay down bank lines and hold cash equivalents, and plans to fund Quadvest with a mix of the forward, retained equity proceeds, and $100 million to $200 million of debt.

Analysts focused on the Texas rate path, the timing and structure of the Quadvest close, and whether the Texas SIC dispute signals a worse regulatory backdrop. Management said the Texas GRC is expected to be filed in the first quarter of 2027 for 2028 rates, that another Texas rate filing would not be sooner than roughly a three-year cadence, and that they do not see deterioration in the Texas regulatory compact. They also said the Quadvest close should follow the August statutory deadline once the order is issued, with HSR already filed, and that Connecticut settlement is possible but not guaranteed.