CWT · California Water Service Group

California Water Service Group's Q1 2026 results reflect a transitional period heavily influenced by the pending 2024 California General Rate Case (GRC). The company reported diluted EPS of $0.07, down from $0.22 in the prior year quarter. Management emphasized that these results were in line with expectations and do not include any benefit from the 2024 CA GRC, as the company awaits a final decision expected on April 30, 2026. Revenue increased to $214.6 million, driven primarily by rate changes and accrued revenue adjustments, which offset a $3.1 million decline due to lower customer consumption. Operating expenses rose to $196.4 million, largely due to an $8.3 million increase in water production costs from higher wholesale rates and a $4.0 million rise in depreciation from new capital assets.

The most significant development for investors is the revised proposed decision (PD) for the 2024 CA GRC, which authorizes substantial revenue increases: $90.5 million (10.9%) in 2026, $43.2 million (4.7%) in 2027, and $48.9 million (5.1%) in 2028. The PD also authorizes key revenue stabilization mechanisms like the Monterey-Style Water Revenue Adjustment Mechanism and a new Sales Reconciliation Mechanism. Once adopted, the company can recognize new rates retroactive to January 1, 2026, providing a clear path for earnings growth.

Strategically, the company is expanding its footprint through the agreement to acquire Nexus Water Group’s systems in Nevada and Oregon for approximately $218 million. This transaction is expected to add 36,000 customer equivalents and approximately $109 million to the rate base, solidifying the company's position as the largest investor-owned water utility in the Western U.S. The acquisition is subject to regulatory approvals. Additionally, the company maintained its strong dividend track record, declaring its 59th consecutive annual increase, targeting an annualized dividend of $1.34 per share. Capital investments reached a record $129.4 million in Q1, with full-year investments anticipated up to $627 million, underscoring the utility's commitment to infrastructure modernization and rate base growth.