Is It Too Late To Consider Buying Essential Utilities, Inc. (NYSE:WTRG)?

The question of whether it’s “too late” to invest in Essential Utilities, Inc. (NYSE:WTRG) hinges on balancing near-term risks with long-term fundamentals. As of May 2025, the stock trades at $40.76—4.9% below its estimated fair value—amid mixed analyst sentiment and looming earnings. Let’s dissect the data to determine if WTRG still offers a compelling entry point.

Recent Performance: A Mixed Picture

WTRG has shown resilience in volatile markets, with a 16.66% rise over three months and a 3.53% gain in April 2025. However, its 52-week trading range ($33.18–$41.78) and a beta of 0.84 (indicating lower volatility than the market) suggest stability. Yet, the stock lags its $44.40 consensus price target, implying 14.76% upside potential if analysts’ forecasts hold.

Financials: Growth Amid Challenges

1. Earnings Momentum
Analysts project $0.80 EPS for Q1 2025, a 9.59% year-over-year increase, driven by regulated water and natural gas operations. Historically, WTRG has exceeded estimates by an average of 5.11% over the past two quarters. If this trend continues, the upcoming May 12 earnings report could spark a price surge.

2. Revenue and Valuation
- Q1 2025 revenue is forecast at $690 million, a 12.73% YoY rise.
- 2025 full-year revenue is projected to grow 6.41%, lagging the S&P 500’s 7.99% expected growth.
- WTRG’s P/E ratio of 19.33 is below the industry average (22.80), suggesting undervaluation.

However, risks loom:
- The debt-to-equity ratio of 1.25 signals elevated leverage, though common in utilities.
- The current ratio of 0.50 raises liquidity concerns, and free cash flow struggles to cover the 3.19% dividend yield.

Analyst Sentiment: Bullish, But Cautious

While WTRG maintains a “Buy” consensus, recent downgrades by Jefferies and Wells Fargo highlight skepticism about its ability to sustain growth. Yet, 142 analyst reports reaffirm confidence in its utility model. Key points from recent updates:
- Morningstar and Argus reaffirmed bullish ratings, citing operational resilience and regulatory stability.
- The average price target of $45.33 (vs. $40.76 current price) reflects optimism.

Dividend Dilemma

The $0.33 dividend per share (yielding 3.19%) is a key draw, but its sustainability is questionable. Analysts note that free cash flows are insufficient to cover payouts long-term. Investors must weigh dividend income against potential cuts if earnings falter.

Long-Term Catalysts

• Infrastructure Investments: The $1+ billion capital improvement program to modernize infrastructure supports long-term growth and regulatory stability.
• Market Position: Serving 5.5 million customers across nine U.S. states, WTRG benefits from predictable demand in essential services.

Key Risks

1. Near-Term Earnings Pressure: The -17.73% EPS growth rate in Q1 2025 (vs. Q1 2024) demands a strong May earnings beat to dispel concerns.
2. Debt Management: High leverage could strain margins if interest rates rise.
3. Regulatory Hurdles: Utility companies rely on rate approvals, which can delay revenue growth.

Conclusion: A Calculated Opportunity

While WTRG faces headwinds like dividend sustainability and modest revenue growth, its undervalued P/E ratio, stable utility model, and upcoming earnings present a compelling case. The $44.40 consensus target suggests 14.76% upside, and the stock’s current price below fair value offers a margin of safety.

Investors should prioritize the May 12 earnings release: a positive surprise could catalyze a rally, while a miss may test support levels. For those seeking income and exposure to essential services, WTRG remains a hold-worthy play, provided the dividend is addressed in future strategy updates.

In short, it’s not too late—but timing hinges on earnings and management’s ability to navigate debt and growth challenges.