H2O America’s Eps Growth Timelines and M&A Strategy Don’t Match in Earnings Calls

Date of Call: Feb 26, 2026

Financials Results

• EPS: 2025 diluted EPS of $2.92, up from $2.87 in 2024; adjusted diluted EPS of $2.99, up from $2.95 in 2024

Guidance:

• Standalone 2026 EPS guidance of $3.08 to $3.18, excluding Quadvest and Cibolo Valley acquisitions.
• 5-year CapEx plan (2026-2030) increased 31% to $2.7 billion.
• Long-term nonlinear EPS growth rate target raised to 6%-8% CAGR, with near-term (2026-2030) growth expected at or above the top end of that range.
• 2026 expected equity issuance of $100M-$125M to fund CapEx and pending Cibolo Valley deal.
• 2026 standalone EPS growth drivers include rate relief and operational efficiency, partially offset by inflation and financing costs.

Business Commentary:

Financial Performance and Growth:

• H2O America reported a full year 2025 diluted EPS of $2.92 and an adjusted diluted EPS of $2.99, near the top end of their guidance range.
• The growth was driven by continued execution of their growth strategy, which includes water infrastructure investments and regulatory recovery efforts.

Strategic Acquisitions:

• The company announced a transformative deal to acquire Quadvest for $540 million, expected to add $483.6 million of rate-making rate base.
• The acquisition aligns with their strategy to grow responsibly and serve more communities, particularly in the high-growth Houston market.

Capital Investment Increase:

• H2O America invested $501 million in 2025, exceeding their revised budget of $486 million, representing a 41% increase over 2024.
• This record CapEx deployment is driven by the need to renew and replace aging infrastructure and comply with environmental regulations.

Regulatory and Legislative Developments:

• The company secured a third one-year deferral in California, maintaining current return parameters through 2027, and Connecticut passed legislation creating the Water Quality and Treatment Adjustment mechanism.
• These developments provide regulatory certainty and support for continued infrastructure investments.

Dividend Increase:

• H2O America's board increased the quarterly dividend by 4.8%, with an expected annualized dividend of $1.76 per share for 2026.
• This increase is consistent with their recent annual cadence and marks the 58th consecutive year of dividend increases.

Sentiment Analysis:

Overall Tone: Positive

• Management described 2025 as 'another strong year' and highlighted 'record execution' with a 41% increase in CapEx. They expressed excitement about a 'transformative' acquisition, increased dividend, and raised long-term EPS growth guidance. Tone is confident: 'I am pleased to share that we delivered... near the top end of our guidance' and 'we are poised to deliver great things in 2026 and beyond.'

Q&A:

• Question from Nicholas Campanella (Barclays): At what point do you think you’re going to be really in that 8%+ level of the 6%-8% EPS CAGR, like you said on the press release? Would that come as soon as 2028, or how would you kind of frame that?
  Response: Management expects EPS accretion from the Quadvest acquisition beginning in 2028, with forecasts indicating growth at or above the top end of the 6%-8% range for the 2026-2030 period, but will not speculate on exact timing ahead of the regulatory process.

• Question from Nicholas Campanella (Barclays): You mentioned this outlook doesn’t contemplate future M&A. What is the timeline to announce something further? Are you going to remain active across jurisdictions?
  Response: Focus is currently on completing the Quadvest acquisition; the company will continue to pursue small tuck-in acquisitions but is not commenting on specific future transactions at this time.

• Question from Angie Storozinski (Seaport): Is it fair to say that the vast majority of the pickup in that longer-term CapEx came from the acquisition, from Quadvest?
  Response: The increased CapEx is a combination of Quadvest acquisition-related investments, additional projects identified in forecasting, a $100M increase for PFAS remediation, and ongoing water supply investments, not solely from the acquisition.

• Question from Angie Storozinski (Seaport): Is there an even bigger earnings step-up between 2029 and 2030? Should I assume some slowdown due to equity dilution to fund growth?
  Response: Growth is driven by multiple rate case implementations in 2030 (Connecticut, Maine), continued capital plan execution, and paydown of a parent company debt maturity; equity issuance is factored into the guidance.

• Question from Alex Kania (BTIG): Is the $125 million figure for equity issuance a reasonable expectation on an ongoing basis to fund the updated CapEx plan?
  Response: On average, $125 million per year is a reasonable expectation for equity issuance to fund the CapEx plan, with potential variances year-to-year and increases as the plan scales.

• Question from Alex Kania (BTIG): Does the 6%-8% EPS growth rate target imply continuation at that rate beyond 2030, using 2030 as a new base year?
  Response: Yes, the 6%-8% growth rate is intended to be a long-term sustainable target extending beyond 2030, with line of sight from the 2030 level.

• Question from Alex Kania (BTIG): How do you see the impact on average customer bills in Texas post-Quadvest rate case, balancing rate refresh and high customer growth?
  Response: Management is committed to affordability and will seek ways to assist low-income customers, such as proposing a low-income tariff, while recovering prudent investments; specifics will be determined through the regulatory process.

Contradiction Point 1

EPS Growth Trajectory and Key Milestones

Contradiction on the expected timing of reaching an 8%+ EPS growth level.

Okay, let's see. The user wants me to take the input "Nicholas Campanella (Barclays)" and turn it into a concise earnings-call question. The rules are strict: only one line, no explanations, just the final question ending with a question mark if possible.First, I need to understand what the input represents. It looks like a person's name followed by a company in parentheses. Typically, in earnings calls, analysts or representatives from companies ask questions. So, Nicholas Campanella from Barclays is probably an analyst asking a question during the call.The task is to rephrase this into a question. The original input isn't a question, so according to the rules, if it's not a question or too vague, I should output it as-is. But maybe there's a way to form a question here. Since he's from Barclays, perhaps the question is about Barclays' performance or something related to their business.But the input doesn't provide specific information about what the question is. So, without more context, it's hard to form a specific question. The user might be expecting a standard question that an analyst from Barclays might ask, but that's speculative. Given the rules, if it's too vague, output as-is. However, the example given in the problem shows that sometimes names can be turned into questions like "What are your thoughts on [Company]'s performance?" Wait, maybe the standard approach here is to ask about the company's performance. So, using the name in parentheses as the company, the question could be "What are your thoughts on Barclays' performance?" But the input is "Nicholas Campanella (Barclays)", so maybe the question is directed at Nicholas, but that's not typical. Usually, the question is about the company. Alternatively, if Nicholas is asking a question, the question might be something like "What are your thoughts on Barclays' performance?" But the input doesn't specify the topic. Since the user wants a concise earnings-call question, and the input is just a name and company, the safest way under the rules is to output the input as-is because there's not enough info. However, maybe the user expects a generic question based on the company name. But according to the rules, if the input isn't a question or too vague, output as-is. The input is a name and company, not a question. So the correct output would be the input as-is. But wait, the example in the problem's initial description shows that sometimes the input is a name and the output is a question. For example, if the input is "John Smith (JPMorgan)", the output might be "What are your thoughts on JPMorgan's performance?" So maybe the user expects that here. In that case, applying that logic, the answer would be "What are your thoughts on Barclays' performance?" Since Barclays is in parentheses. But the input isn't a question, so the user's instruction says if it's not a question, output as-is. But maybe the example shows that when it's a name with a company, it's transformed into a question. Hmm, the rules say: "If the input is NOT a question, is too vague, or lacks enough information to form a clear earnings-call question, output the input EXACTLY as-is, with no modification." So since the input isn't a question, and lacks enough info, output as-is. Therefore, the correct output is "Nicholas Campanella (Barclays)" without modification. But the user might be expecting a question. Wait, but the user's instruction says that if a rewrite is possible, the output must end with a question mark. So if it's possible to form a question, then do so. But how do we determine that? The input is a name and company. In earnings calls, analysts often ask questions about the company's performance. So maybe the question is "What are your thoughts on Barclays' performance?" But the input doesn't specify that. So is that a valid rewrite? The problem is whether the input provides enough info. Since the company name is given, maybe it's acceptable to form a generic question. However, the input isn't a question, so according to the rules, if it's not a question and lacks enough info, output as-is. But the example in the user's mind might be different. In this case, since the input is a person from a company, and earnings call questions often involve the company's performance, perhaps the correct approach is to form a question. But the rules are strict. Let me check again. The rules state: "If the input is NOT a question, is too vague, or lacks enough information to form a clear earnings-call question, output the input EXACTLY as-is, with no modification." So the key is whether the input lacks enough information. The input has a company name in parentheses. If we can form a clear question using that - Nicholas Campanella (Barclays)

2025Q4: The accretion from the Quadvest acquisition is forecasted to begin in 2028. The company expects to deliver a nonlinear EPS growth rate at or above the top end of the 6%-8% range over the 2026-2030 period. - [Ann Kelly](CFO)

When do you expect to reach the 8%+ level mentioned in the press release, and could this occur as soon as 2028? - Ian Rapp (Bank of America)

2025Q3: The long-term growth rate will be refreshed in February 2026, along with the 2026+ CapEx plan. It will be based on both the new CapEx outlook and the finalization of the Quadvest acquisition. - [Andrew Walters](CEO)

Contradiction Point 2

M&A Strategy and Timeline

Contradiction on the company's focus and plans for future acquisitions.

Nicholas Campanella (Barclays) - Nicholas Campanella (Barclays)

2025Q4: The focus for the near and medium term is on completing the Quadvest acquisition. The company will remain active on small tuck-in acquisitions but is not planning any groundbreaking deals beyond Quadvest and Cibolo Valley at this time. - [Andrew Walters](CEO)

Given that the current outlook does not include future M&A, what is the timeline for announcing further M&A activities? - Angie Storozynski (Seaport)

2025Q1: Acquisition opportunities exist within the core states, with a primary focus on Texas, where the company has successfully closed several deals. The company is also expanding its view in California and sees some smaller opportunities in Connecticut and Maine. While open to opportunities in other states... - [Andrew Walters](CEO)

Contradiction Point 3

Regulatory Mechanism Impact on Earnings

Contradiction on whether a new regulatory mechanism will impact near-term earnings.

What are your thoughts on Seaport's analysis? - Angie Storozinski (Seaport)

2025Q4: The step-up between 2029 and 2030 is influenced by several factors, including new rate cases in Connecticut and Maine (which would take effect in 2030)... - [Ann Kelly](CFO)

Okay, let's see. The user wants me to rewrite the input into one concise earnings-call question. The input is: "On the earnings trajectory... I'm asking about the step change between 2029 and 2030. Is it fair to assume that there is an even bigger earnings step-up between 2029 and 2030?"First, I need to make sure I follow the rules. The output must be exactly one line, only the final question text, end with a question mark if possible, and no explanations or prefaces. If the input isn't a clear question, I leave it as is.Looking at the input, it's two sentences. The first part is a bit vague ("On the earnings trajectory..."), but the second part is a direct question. The user is asking if there's a bigger earnings increase between 2029 and 2030. The key elements are the time period (2029-2030) and the "step-up" in earnings.I need to combine these into a single, concise question. The original question ends with a question mark, so that's good. The first part can be condensed. Maybe start with "Is it fair to assume..." and mention the step-up between 2029 and 2030. The first part about the earnings trajectory is just context, so maybe we can remove that to make it more direct.So the rewritten question would be: "Is it fair to assume there is a significant earnings step-up between 2029 and 2030?" Wait, the original says "even bigger," but there's no prior context mentioned. Maybe "even bigger" refers to a previous step change. But since the input only mentions the step change between 2029 and 2030, maybe "even bigger" isn't necessary here. The user might be comparing it to an implied previous step, but without that context, it's safer to just ask about the existence of a bigger step-up. Alternatively, maybe the user intended to compare it to a previous period not mentioned here. But since the input only refers to 2029-2030, maybe the "even bigger" is redundant or confusing. Alternatively, maybe the user is asking if the step-up between 2029-2030 is larger than some prior step. But without that prior info, it's unclear. However, the original question does include "even bigger," so maybe we should keep that. Wait, the original says "Is it fair to assume that there is an even bigger earnings step-up between 2029 and 2030?" So the question is whether the step-up between 2029-2030 is even bigger than something else. But the input doesn't mention what it's bigger than. That's a problem. Wait, the first part says "I'm asking about the step change between 2029 and 2030." So maybe the user is referring to a previous step change. For example, maybe between 2028-2029. But the input doesn't specify. So the question is a bit ambiguous. However, the user is asking if there's an "even bigger" step-up, implying there was a prior step-up. But since the input doesn't mention that, maybe the question is not clear. But according to the rules, if the input is too vague, we should output it as-is. However, the input is a question. Let me check again. The input is a question, but maybe it's too vague because "even bigger" refers to something not mentioned. But maybe in context of an earnings call, the user is referring to previous guidance or known steps. Alternatively, maybe the user is asking if the step-up between 2029-2030 is larger than expected. But without knowing the baseline, it's unclear. However, the task is to rewrite it into a clear question if possible. So perhaps rephrase it to ask about the magnitude of the step-up between 2029-2030 without the "even bigger" part, which might be confusing. So the final question would be: "Is there a significant earnings step-up between 2029 and 2030?" But the original question includes "Is it fair to assume that there is an even bigger..." which is more about the fairness of the assumption. So maybe the best way is to keep "Is it fair to assume there is a significant earnings step-up between 2029 and 2030?" That's concise, includes the key elements, and ends with a question mark. The "even bigger" part is omitted because there's no context for it. But maybe the user intended to compare it - Richard Sunderland (JPMorgan Securities)

2025Q1: The mechanism is not expected to impact 2025 earnings but would benefit future years... - [Bruce Hauk](COO) & Eric Thornburg

Contradiction Point 4

Primary Drivers of Increased 5-Year CapEx

Contradiction on whether the CapEx increase is mainly due to acquisitions or broader investments.

Is Angie Storozinski participating in the earnings call? - Angie Storozinski (Seaport)

2025Q4: The increase in the 5-year CapEx budget is driven by a combination of factors: additional CapEx related to the Quadvest acquisition, increased costs from project bids, a $100 million increase in PFAS-related investments, and ongoing investments in water supply and main replacement. - [Ann Kelly](CFO), [Andrew Walters](CEO)

Did the majority of the increase in long-term CapEx per subsidiary result from the Quadvest acquisition? - Richard Sunderland (JPMorgan)

2024Q4: The update is definitely driven by the higher capital expenditure plan. - [Andrew Walters](CFO)

Contradiction Point 5

Earnings Growth Trajectory and Stepping

Contradiction on the characterization of the 2029-2030 earnings step-up.

Angie Storozinski (Seaport) - Angie Storozinski (Seaport)

2025Q4: The step-up between 2029 and 2030 is influenced by several factors, including new rate cases in Connecticut and Maine (which would take effect in 2030), the capital plan, and the paydown of parent company debt maturing in 2029. - [Ann Kelly](CFO)

Is it fair to assume there is an even larger earnings step-up between 2029 and 2030? - Richard Sunderland (JPMorgan)

2024Q4: The update is definitely driven by the higher capital expenditure plan. - [Andrew Walters](CFO)