Middlesex Water’s Q1 2025 Earnings: Revenue Triumph Amid EPS Challenges – What Investors Need to Know

Middlesex Water Company (NASDAQ: MSEX) delivered a mixed set of results for its first quarter of 2025, showcasing robust revenue growth while grappling with an earnings per share (EPS) decline. The company’s performance highlights the complexities of operating in a regulated utility sector, where strategic investments and infrastructure spending can both drive growth and pressure profitability.

Revenue Growth Outshines Expectations

Operating revenue surged 9.4% year-over-year to $44.3 million, easily surpassing consensus estimates by 5.5%. This strong performance was fueled by rate increases, customer growth, and higher consumption across its core systems. The Middlesex system contributed $3.4 million of the revenue boost, while the Tidewater Utilities, Inc. system added $0.6 million. Notably, Middlesex completed the acquisition of Ocean View water utility assets in Delaware during the quarter, adding 900 customers and signaling a commitment to selective, sustainable growth.

EPS Decline: A Tale of One-Time Gains and Rising Costs

Despite the revenue success, diluted EPS fell to $0.53, down 10.2% from $0.59 in Q1 2024. This miss was largely attributable to a $4.3 million one-time recovery in Q1 2024 related to costs from the Park Avenue water treatment plant, which did not recur this year. Excluding this anomaly, operational improvements in 2025—including rate hikes and customer growth—would have narrowed the gap.

However, rising operating expenses also played a role. Costs increased 6.5% to $32.7 million, driven by weather-related main break repairs, higher production expenses, and the absence of the prior-year recovery. Net income dropped to $9.5 million from $10.7 million, further pressuring EPS.

Strategic Moves to Watch

Middlesex’s long-term strategy remains anchored in regulated utility growth and infrastructure reinvestment:
1. Infrastructure Spending: The company invested $19 million in Q1 2025 and plans $93 million in total infrastructure spending for 2025, targeting resiliency and efficiency. A third Distribution System Improvement Charge (DSIC) filing is expected to generate $1.9 million annually starting June 2025, supplementing existing DSIC revenues of $1.1 million.
2. Dividend Discipline: Middlesex maintained its dividend at $0.34 per share, extending its 52-year streak of annual increases. This underscores its status as a dividend aristocrat, a key draw for income-focused investors.

Risks and Challenges

• Cost Pressures: Weather-related disruptions and rising production costs could continue to strain margins unless offset by rate adjustments.
• Regulatory Dependence: Middlesex’s growth hinges on approvals for rate cases and DSIC filings. While its track record is strong, delays or unfavorable rulings could disrupt cash flows.
• EPS Volatility: The absence of one-time gains in 2025 highlights the need for sustained operational improvements to stabilize earnings.

Investor Outlook

Analysts project $2.53 EPS and $199 million revenue for 2025, with Q2 2025 estimates at $0.70 EPS and $52 million revenue. Middlesex’s Zacks Rank #1 (Strong Buy) reflects optimism around its regulated utility model and infrastructure tailwinds.

Conclusion

Middlesex Water’s Q1 2025 results paint a picture of resilience amid complexity. While the EPS decline underscores near-term headwinds from one-time gains and cost pressures, the revenue growth and strategic investments—such as the Ocean View acquisition and DSIC filings—position the company for sustained value creation.

Investors should note that Middlesex’s regulated utility framework and dividend discipline provide a stable foundation, even as it navigates short-term challenges. With $93 million in infrastructure investments planned for 2025 and a track record of executing on regulatory mechanisms, the company appears well-positioned to deliver long-term shareholder returns.

The question for investors is whether the top-line momentum and strategic bets outweigh the EPS volatility. For those focused on dividends and regulated growth, Middlesex’s fundamentals remain compelling—despite the bumps in the road.