HTO · H2O America

H2O America's first quarter 2026 results were in line with internal expectations, with GAAP diluted EPS of $0.49 unchanged year-over-year and adjusted diluted EPS of $0.50 also flat. Revenue increased 9% to $183.3 million, driven by rate increases of $11.8 million primarily in California, Connecticut, and Texas, along with higher customer usage of $2.0 million. Operating expenses rose 11% to $145.9 million, reflecting higher water production costs (up $7.5 million) due to increased per-unit costs and usage, and other operating expenses (up $6.7 million) from depreciation, maintenance, and employee-related costs. Net income grew 15% to $19.0 million, while adjusted net income increased 16% to $19.4 million. The effective tax rate fell to 15% from 17% due to higher flow-through tax benefits. Management reiterated 2026 standalone adjusted diluted EPS guidance of $3.08-$3.18, excluding the pending Quadvest and Cibolo Valley acquisitions. The long-term adjusted EPS CAGR target of 6-8% was reaffirmed, with expectations to deliver at or above the top end over 2026-30. The Quadvest acquisition is progressing; the PUCT deemed the STM application administratively complete, and closing is anticipated in the second half of 2026. The company also declared a $0.44 quarterly dividend, marking 58 consecutive years of dividend increases.