Essential Utilities, Inc. (NYSE:WTRG) Earnings Preview and Financial Health

• Northcoast Research sets a price target of $46 for WTRG, indicating an 11.62% potential upside from its current price.
• The merger with American Water Works is valued at $63 billion, including debt, aiming to enhance service offerings and operational efficiencies.
• Legal investigations by Ademi Firm and Halper Sadeh LLC are underway, focusing on potential breaches of fiduciary duty and the fairness of the sale terms for Essential shareholders.

Essential Utilities, Inc. (NYSE: WTRG) is a prominent player in the utilities sector, providing water and wastewater services. Recently, Northcoast Research set a price target of $46 for WTRG, while its current price is $41.21, indicating a potential upside of approximately 11.62%. This price target comes amidst significant developments involving a merger with American Water Works Company, Inc.

The merger between Essential Utilities and American Water Works is valued at around $63 billion, including debt. This all-stock deal will see Essential shareholders receiving 0.305 shares of American Water for each share they own. Post-merger, American Water shareholders will control about 69% of the combined entity, while Essential shareholders will own approximately 31%.

The transaction has attracted scrutiny, with the Ademi Firm investigating potential breaches of fiduciary duty by Essential Utilities. Concerns include substantial benefits for Essential insiders and a penalty clause that may limit competing offers. Halper Sadeh LLC is also examining the fairness of the sale terms for Essential shareholders, urging them to act quickly to protect their interests.

Despite these legal investigations, the merger aims to enhance service offerings and operational efficiencies, creating a stronger entity in the utilities sector. WTRG's stock has seen minor fluctuations, with a current price of $41.19 and a market capitalization of approximately $11.55 billion. The stock's trading volume today is 2,985,795 shares, reflecting investor interest amidst these developments.

Essential Utilities, Inc. (NYSE:WTRG) is a prominent player in the water supply industry, providing water and wastewater services to millions of customers. As part of the Zacks Utility - Water Supply industry, WTRG has consistently demonstrated strong financial performance. The company is set to release its quarterly earnings on May 12, 2025, with Wall Street analysts estimating earnings per share (EPS) of $0.80 and projected revenue of $690 million.

The upcoming earnings report for the quarter ended March 2025 is anticipated to show a year-over-year increase in earnings, driven by higher revenues. Analysts expect WTRG to report quarterly earnings of $0.80 per share. The stock's movement will largely depend on whether the actual results exceed or fall short of these expectations. A positive earnings surprise could lead to a rise in the stock price, while a miss might result in a decline.

Essential Utilities has a strong track record of surpassing earnings estimates, with an average earnings surprise of 5.11% over the last two quarters. In the most recent quarter, the company exceeded expectations by reporting earnings of $0.67 per share against an anticipated $0.66, marking a 1.52% surprise. In the previous quarter, WTRG delivered $0.25 per share, surpassing the consensus estimate of $0.23, resulting in an 8.70% surprise.

The company's financial metrics provide insight into its market valuation and financial health. WTRG has a price-to-earnings (P/E) ratio of approximately 18.75, indicating how much investors are willing to pay for each dollar of earnings. Its price-to-sales ratio stands at about 5.38, reflecting the market's valuation of its sales. The enterprise value to sales ratio is around 9.08, while the enterprise value to operating cash flow ratio is approximately 24.59.

WTRG's debt-to-equity ratio is 1.25, suggesting it has more debt than equity, which is a common scenario in the utility sector. The current ratio of 0.50 indicates the company's ability to cover short-term liabilities with short-term assets. The earnings yield for WTRG is about 5.33%, providing a measure of the return on investment for shareholders.