How does american water make money?

american water generates $5.1B in annual revenue (annual revenue · their business grew +10.1% last year).

What is AWK's XVARY composite score?

american water (AWK) has an XVARY composite score of 57/100, rated below average. This combines growth, value, risk, and momentum factors.

AWK — american water stock analysis

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what it is

American Water runs water and wastewater systems for about 14 million people across 24 states.

how it gets paid

Last year American Water made $5.1B in revenue. Pennsylvania regulated utility was the main engine at $1.17B, or 23% of sales.

why it's growing
Revenue grew 10.1% last year. EDGAR shows revenue up 165% vs. prior year to $3.9 billion and EPS up 130% to $4.47.

what just happened

Revenue of $3.9B, but the reported EPS miss reminded you that steady utilities still miss numbers.

At a glance

B++ balance sheet — above average — nothing keeping you up at night

65/100 earnings predictability — reasonably predictable

22.9x trailing p/e — priced about right

6.0% return on capital — nothing to write home about

xvary composite: 57/100 — below average

What they do

American Water runs water and wastewater systems for about 14 million people across 24 states.

Your water utility is not an app you delete. American Water serves about 14 million people in 24 states, and those pipes, permits, and rate cases make competition rare. Regulated operations were 92% of 2024 revenue, which means the business is boring in the useful way.

utilities large-cap regulated-utility water infrastructure

How they make money

$5.1B annual revenue · their business grew +10.1% last year

Pennsylvania regulated utility

$1.17B

New Jersey regulated utility

$1.07B

Missouri regulated utility

$0.71B

Illinois regulated utility

$0.56B

Other regulated states

$1.18B

Market-based businesses

$0.41B

The products that matter

regulated water and wastewater service

Regulated Water Utilities

$5.1B revenue · 14M people served

this is the whole story: $5.1B in annual revenue from customers who cannot switch providers. pennsylvania alone contributes $1.2B, so the local regulators matter almost as much as the pipes.

core engine

water systems on military bases

Military Services

included inside the broader revenue base

the business matters because it adds contract revenue outside the standard local utility footprint, but this page does not break out a separate number inside the $5.1B total. that thin disclosure is the point.

not broken out

residential protection plans

Homeowner Services

ancillary to the $5.1B utility base

this sits next to the core utility model rather than replacing it. the page gives no separate revenue figure, which tells you it is not what drives a $26B equity story.

small side business

Key numbers

22.9x

trailing p/e

P/E ratio → how many years of current earnings you are paying for → so what: about 23 years is rich for a utility with 4.5% projected earnings growth.

36.7%

operating margin

Operating margin → profit after running the business → so what: AWK keeps about 37 cents from each revenue dollar before interest and taxes.

6.0%

return on capital

Return on capital → profit earned on the money put into pipes and systems → so what: this is stable, not spectacular.

$143

18-month target

Target price → a rough fair-value estimate over the next year and a half → so what: the base case offers only about 8.6% upside from $131.67.

Financial health

B++

strength

balance sheet grade B++ — above average financial health
risk rank 2 — safer than 80% of stocks
price stability 85 / 100
return on equity 10% — $0.10 profit for every $1 investors have put in

B++ — functional but not a standout on the balance sheet.

Total return vs. market

You invested $10,000 in AWK 3 years ago → it's now worth $9,270.

The index would have given you $13,920.

same period. same starting point. AWK trailed the market by $4,650.

source: institutional data · total return

What just happened

missed estimates

Revenue of $3.9B, but the reported EPS miss reminded you that steady utilities still miss numbers.

EDGAR shows quarterly revenue up 165% vs. prior year to $3.9 billion and EPS up 130% to $4.47. Consensus data separately shows the last earnings print at $1.22 versus a $1.28 estimate, so the data sets are not telling the same story.

$3.9B

revenue

$4.47

eps

n/a

the number that mattered

The important number is $5.1 billion in annual revenue, up 10.1%, because it shows rate-driven growth is still doing the heavy lifting.

american water works has agreed to merge with essential utilities.

in late october, the two mostly water utilities (the latter also has a substantial natural gas utility operation), agreed to an allstock deal with an enterprise value of about $63 billion. according to the terms of the deal, each essential share will be converted to.305 of a share of american water works.
when the transaction is completed, awk stockholders will control around 69% of the company with essential stakeholders owning the remaining interest.

should the merger be approved, the combined corporation would have a market capitalization of around $40 billion.
operations would be conducted in 17 states and 4.7 million customers would be served.

american water’s president and ceo would retain both positions, while essential’s ceo would be vice chair of the board of directors.
the american water works name would be kept, too.
we believe that the combination would be worthwhile for both utility customers and shareholders.

source: company earnings report, 2026

What could go wrong

the #1 risk is rate-case pushback in pennsylvania and new jersey.

∘

med

rate increases get trimmed or delayed

AWK needs regular approvals to earn on infrastructure spending. pennsylvania and new jersey together represent about $2.3B of revenue based on the state figures shown above, so pushback there matters more than a routine quarterly beat.

if the big states slow rate relief, earnings growth and valuation support both take a hit

∘

med

the essential utilities merger fails to clear

the proposed $63B all-stock deal needs multi-state approval. if one major regulator objects, you are left with the stand-alone company — a stable utility that has still turned a 3-year holding period into a loss.

the rerating case weakens fast if the main catalyst disappears

∘

med

infrastructure spending runs ahead of what regulators reimburse

water systems are old and expensive to replace. the company already frames the model around $2B+ of annual infrastructure spending. if costs rise faster than approved returns, margin pressure shows up before new rates do.

rate lag can squeeze profitability even when demand is perfectly steady

∘

med

the business stays safe and the stock stays dull

this is the boring risk nobody markets. AWK already has an 85 / 100 price stability score and a stability score of 2, but the stock still lagged the market by $4,650 on a $10,000 starting investment over three years.

you can be right about the business and still get mediocre returns from the stock

pennsylvania and new jersey account for about $2.3B of the revenue shown here, and the merger adds a second layer of binary approval risk on top of that concentration.

source: institutional data · regulatory filings · risk analysis

Pay attention to

catalyst

merger approval milestones

the essential utilities deal needs multi-state regulatory approval. each ruling is a real event for the stock, not paperwork theater.

metric

rate case outcomes in pennsylvania and new jersey

those two states contribute about $2.3B of revenue based on the figures above. if either turns less cooperative, the earnings path changes.

trend

EPS growth versus the promised steady story

2025 EPS rose 7% from $5.39 to $5.75. if that starts slipping while the multiple stays near 23x, the market will notice.

risk

capital spending discipline

the model depends on $2B+ of annual infrastructure investment eventually making its way into the rate base. delays or overruns are where safe utilities get annoying.

Analyst rankings

short-term outlook

below average

momentum score 4 — in human-speak, analysts do not see a near-term breakout while the merger approval process hangs over the stock.

risk profile

above average

stability score 2 — safer than roughly 80% of stocks. the floor looks solid even if the ceiling is regulated.

chart momentum

below average

technical score 4 — the chart still looks like a utility stock that forgot to reward patience.

earnings predictability

65 / 100

earnings predictability is decent, not perfect. in plain english: you usually get steadiness here, but not enough to ignore valuation.

source: institutional data

Institutional activity

institutions have been net buying for 3 consecutive quarters — 508 buyers vs. 464 sellers in 3q2025. total institutional holdings: 0.2B shares. net buying for 3 quarters.

source: institutional data · 1q2025-3q2025

source: institutional data

Price targets

3-5 year target range

$110 $175

$132 current price

$143 target midpoint · +9% from current · 3-5yr high: $225 (+70% · 16% ann'l return)

source: institutional data · analyst targets

The deep dive

AWK

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the full analysis is in the works.

what you'll get

dcf valuation model

bull / base / bear scenarios

competitive moat breakdown

quarterly earnings tracker

operating model projections

risk matrix with kill criteria

original price target + conviction

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