Core Insights - California Water Service Group (CWT) is recognized as one of the overlooked dividend stocks to consider for investment [1] - Baird has reduced its price target for CWT from $60 to $55 while maintaining an Outperform rating following the company's third-quarter results [2] - The third-quarter revenue for CWT was $311.2 million, a 4% increase year-over-year, but it fell short of analysts' expectations by over $10 million [3] Financial Performance - CWT reported a net income of $61.2 million for the third quarter, with diluted earnings per share remaining at $1.03, consistent with the previous year [3] - The company invested over $135 million in water system infrastructure during the quarter, representing a 14.8% increase from the same period last year [4] - CWT announced its 323rd consecutive quarterly dividend of $0.30 per share, continuing a 58-year streak of annual dividend increases, with a compound annual growth rate of 7.7% over the past five years [4] Future Outlook - Management indicated that if the proposed 2024 California General Rate Case and infrastructure improvement plan are approved, the regulated rate base could grow at an annualized rate of nearly 12% [5] - CWT operates as a regulated provider of water and wastewater services throughout California [5]

Core Insights - Investing in stocks based on valuation metrics, particularly the price-to-sales (P/S) ratio, can identify opportunities with strong upside potential, especially for unprofitable or early-stage companies [1][2][3] Valuation Metrics - The P/S ratio compares a company's market capitalization to its revenues, providing a clearer picture of value when earnings are minimal or volatile [2][5] - A P/S ratio below 1 indicates a good bargain, as investors pay less than a dollar for each dollar of revenue generated [6] - The P/S ratio is often preferred over the price-to-earnings (P/E) ratio due to the difficulty of manipulating sales figures compared to earnings [7] Investment Opportunities - Low P/S stocks can offer compelling opportunities, often trading below intrinsic value, making them attractive for investors seeking upside potential [3][10] - Companies such as Macy's Inc. (M), California Water Service Group (CWT), Shoe Carnival (SCVL), Pebblebrook Hotel Trust (PEB), and FTI Consulting Inc. (FCN) have low P/S ratios and potential for higher returns [4][10] Company Profiles - **Macy's Inc. (M)**: Undergoing a transformation with its "Bold New Chapter" program, focusing on digital initiatives and strong fundamentals, currently has a Value Score of A and Zacks Rank 1 [12][13] - **California Water Service Group (CWT)**: Aims to expand operations in the western U.S. through acquisitions, with a Value Score of B and Zacks Rank 2 [14][15] - **Shoe Carnival (SCVL)**: Transitioning to a higher-end market with a disciplined strategy, currently has a Zacks Rank 1 and Value Score of A [16][17] - **Pebblebrook Hotel Trust (PEB)**: Focused on operational efficiency and capital allocation, with a Value Score of A and Zacks Rank 1 [18][20] - **FTI Consulting Inc. (FCN)**: A global advisory firm with a diversified platform, currently has a Value Score of B and Zacks Rank 2 [21][22]

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Financial Performance - Net income attributable to California Water Service Group for Q3 2025 was $61.2 million, a slight increase from $60.7 million in Q3 2024, with earnings per diluted share remaining at $1.03[107]. - For the nine months ended September 30, 2025, net income decreased to $116.7 million from $171.1 million in the same period of 2024, reflecting a $54.4 million decline primarily due to a $34.4 million decrease in operating revenue[108]. - Operating revenue for Q3 2025 increased by $11.6 million, or 3.9%, to $311.2 million compared to $299.6 million in Q3 2024[110]. - For the nine months ended September 30, 2025, operating revenue decreased by $34.4 million, or 4.2%, to $780.2 million compared to $814.6 million in the same period of 2024[110]. - Total operating expenses for Q3 2025 increased by $7.8 million, or 3.4%, to $240.6 million, driven by higher water production costs and depreciation[111]. - For the nine months ended September 30, 2025, total operating expenses rose by $13.6 million, or 2.2%, to $635.4 million, primarily due to increases in water production costs and other operational expenses[112]. - The net change in operating revenue for Q3 2025 was influenced by rate increases of $12.7 million, partially offset by a decrease in customer usage of $8.1 million[113]. Water Production and Costs - Water production sources for Q3 2025 included 52% from well production, 44% from purchased water, and 4% from surface water, compared to 50%, 46%, and 4% respectively in Q3 2024[114]. - Water production costs increased by $7.6 million, or 8.0%, for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to an increase in wholesale rates[115]. - For the nine months ended September 30, 2025, water production costs rose by $14.3 million, or 6.0%, compared to the same period in 2024, driven by higher wholesale rates and increased customer usage[115]. - Other operations expenses increased by $7.8 million for the nine months ended September 30, 2025, mainly due to a $2.9 million rise in bad debt expense and a $2.2 million increase in labor expense[116]. - Depreciation and amortization expense rose by $3.1 million and $9.2 million for the three and nine months ended September 30, 2025, respectively, due to utility plant placed in service in 2024[117]. Regulatory and Compliance - The company anticipates regulatory challenges and uncertainties regarding rate increases and compliance with new environmental standards, which may impact future financial performance[102]. - The effective tax rate for the company is expected to remain stable, with no material impact from recent legislative changes on income tax expense for Q3 2025[106]. - The Water Board adopted a maximum contaminant level (MCL) of 10 parts per billion for Chromium-6 in drinking water, with compliance required within two to four years[177]. - Management believes that supplies will meet current water quality standards using available treatment processes or by installing the best available technologies[173]. - The company is well positioned to comply with new urban water use regulations established by California's Assembly Bill 1668 and Senate Bill 606[175]. Future Investments and Projections - Cal Water proposed to invest over $1.6 billion in infrastructure improvements from 2025 to 2027, with approximately $1.3 billion allocated for new capital investments[124]. - Cal Water expects to increase total revenue by $140.6 million, or 17.1%, in 2026, with additional increases of $74.2 million, or 7.7%, in 2027, and $83.6 million, or 8.1%, in 2028[125]. - In September 2025, Cal Water submitted an advice letter to recover $18.7 million related to MWRAM undercollection through surcharges implemented on October 1, 2025[134]. - Cal Water filed an application for $125.0 million in PFAS treatment costs in 2026 and 2027, with associated annual revenue increases of $6.7 million and $9.0 million for 2027 and 2028, respectively[136]. - The company implemented new rates on January 1, 2025, resulting in an annual gross revenue increase of $27.2 million from escalation rate increases for 18 regulated districts[129]. Cash Flow and Financing - Cash flow from operations for the nine months ended September 30, 2025, was $254.7 million, an increase of 14.0% compared to $222.8 million in the same period of 2024[147]. - Utility capital expenditures for the nine months ended September 30, 2025, totaled $364.7 million, with an estimated range of $450.0 million to $550.0 million for the full year 2025[150][168]. - Net cash provided by financing activities for the nine months ended September 30, 2025, was $139.1 million, compared to $132.3 million for the same period in 2024[151]. - The company paid dividends of $56.0 million during the nine months ended September 30, 2025, up from $48.8 million in the same period of 2024[151]. - The company borrowed $420.0 million on unsecured revolving credit facilities during the nine months ended September 30, 2025, compared to $370.0 million in 2024[152]. Asset and Shareholder Information - Book value per common share increased to $28.54 as of September 30, 2025, compared to $27.49 at December 31, 2024[167]. - The net income for the nine months ended September 30, 2025, was $118.1 million, compared to $193.5 million for the full year 2024[162]. - As of September 30, 2025, total assets were $5.01 billion, an increase from $4.71 billion as of December 31, 2024[163]. - The company plans to use proceeds from the issuance of $70.0 million and $100.0 million in senior unsecured notes to refinance existing indebtedness and for general corporate purposes[158]. - The company expects to maintain a long-term dividend payout ratio goal of 60% of net income[164]. Water Supply and Extraction - Average annual groundwater extraction from adjudicated groundwater basins is approximately 7.8 billion gallons, representing 14.9% of the total average annual water supply pumped from wells for 2023 to 2024[172]. - Average annual groundwater extraction from managed groundwater basins is approximately 29.6 billion gallons, accounting for 56.4% of the total average annual water supply pumped from wells for 2023 to 2024[172]. - Well pump taxes for the nine months ended September 30, 2025, were $17.8 million, compared to $15.7 million for the same period in 2024[172]. - Statewide reservoir storage as of September 30, 2025, was 109% of the historical average over the last 50 years[173]. - Estimated capital investment required to comply with the PFAS regulation is approximately $226.0 million[176]. Contractual Obligations - There have been no material changes in contractual obligations outside the normal course of business during the nine months ended September 30, 2025[178].

Financial Data and Key Metrics Changes - Q3 2025 revenue increased by $11.6 million, or 3.9%, to $311.2 million compared to $299.6 million in Q3 2024 [17] - Net income for the quarter was $61.2 million, or $1.03 per diluted share, consistent with the prior year [17] - Year-to-date operating revenue for 2025 was $780.2 million, a decrease of $34.4 million, or 4.2%, compared to $814.6 million for the first nine months of 2024 [20] - Year-to-date net income attributable to the Group was $116.7 million, a decrease of $54.4 million, or 31.8%, compared to $171.1 million in the same period in 2024 [20] Business Line Data and Key Metrics Changes - Capital investments for Q3 2025 were $135 million, up 14.8% year-over-year, and year-to-date investments totaled $364.7 million, representing a 9.8% increase compared to 2024 [11][23] - The company received an additional $24 million in net PFAS settlement proceeds during the quarter, bringing the year-to-date total recovery to about $35 million [13] Market Data and Key Metrics Changes - The company continues to expand in Texas, with an all-party settlement in Texas awaiting final Commission approval [12] - The South Austin market is projected to grow significantly, with a current population of 5 million expected to exceed 8 million by 2050 [32] Company Strategy and Development Direction - The company is focused on maintaining operational excellence and executing capital programs responsibly as it approaches its centennial year in 2026 [50] - The company is pursuing alternative water resources and partnerships to support growth in Texas, including a public-private partnership with the Guadalupe-Blanco River Authority [33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the California general rate case, noting improved communication and transparency from the Commission compared to previous cases [43][45] - The company is well-positioned to absorb inflationary pressures and maintain growth despite economic headwinds [78] Other Important Information - The company declared its 323rd consecutive quarterly dividend of $0.30 per share, representing a 10.71% increase [30] - The company has a strong liquidity profile with $76 million in unrestricted cash and $255 million available on bank lines of credit [24] Q&A Session Summary Question: Rate base growth projections - Management clarified that there is currently no partial settlement in California and they remain committed to their capital expenditure projections [54][56] Question: Impact of recent merger in Texas - Management stated that their growth strategy remains focused on organic growth and infrastructure reinvestment, despite the merger of competitors [72][74] Question: Planning for higher interest rates - Management indicated that they are well-positioned with long-term financing and have mechanisms in place to adjust for changes in the cost of capital [80][82]

Core Insights - California Water Service Group (CWT) reported quarterly earnings of $1.03 per share, missing the Zacks Consensus Estimate of $1.20 per share, representing an earnings surprise of -14.17% [1] - The company posted revenues of $311.24 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.36% and showing an increase from $299.56 million year-over-year [2] - The stock has added about 4.7% since the beginning of the year, underperforming the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $235.2 million, and for the current fiscal year, it is $2.41 on revenues of $1.01 billion [7] - The estimate revisions trend for California Water Service Group was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Utility - Water Supply industry is currently in the top 17% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Today's Speakers Marty Kropelnicki Investing for Life Third Quarter 2025 Earnings Presentation October 30, 2025 ©2025 California Water Service Group 1 Chairman & CEO James Lynch Sr. Vice President, CFO & Treasurer Greg Milleman Vice President, Rates & Regulatory Affairs ©2025 California Water Service Group 2 Forward-Looking Statements and Other Important Information Executing Strategy in Q3 2025 Delivered strong performance through first nine months of 2025* Invested $135.2 million in Q3 in water system inf ...

Financial Performance - Q3 2025 net income was $61.2 million, with diluted EPS of $1.03, consistent with Q3 2024 results[6] - Revenue for Q3 2025 increased by $11.6 million or 3.9% to $311.2 million compared to $299.6 million in Q3 2024[7] - YTD 2025 net income decreased by 31.8% to $116.7 million or $1.96 per diluted share compared to $171.1 million or $2.93 per diluted share in YTD 2024[9] - YTD 2025 revenue decreased by $34.4 million or 4.2% to $780.2 million compared to $814.6 million in YTD 2024[9] - Operating revenue for Q3 2025 was $311,235,000, an increase from $299,563,000 in Q3 2024, representing a growth of approximately 0.22%[28] - Net income attributable to California Water Service Group for Q3 2025 was $61,230,000, compared to $60,680,000 in Q3 2024, reflecting a slight increase of about 0.90%[28] - Reported GAAP Revenue for the nine months ended September 30, 2025, was $780,162 million, a decrease from $814,611 million in 2024, reflecting a decline of approximately 4.1%[30] - Adjusted Revenue (non-GAAP) increased to $780,162 million in 2025 from $727,129 million in 2024, representing a growth of about 7.3%[30] - Reported GAAP Net Income for the nine months ended September 30, 2025, was $116,729 million, down from $171,148 million in 2024, indicating a decrease of approximately 31.8%[30] - Adjusted Net Income (non-GAAP) rose to $116,729 million in 2025 compared to $107,168 million in 2024, showing an increase of about 8.9%[30] - Reported GAAP Diluted Earnings Per Share (EPS) decreased to $1.96 in 2025 from $2.93 in 2024, a decline of approximately 33.2%[30] - Adjusted Diluted EPS (non-GAAP) increased to $1.96 in 2025 from $1.84 in 2024, reflecting a growth of about 6.5%[30] Operating Expenses and Investments - Operating expenses for Q3 2025 increased by $7.8 million or 3.4% to $240.6 million compared to $232.8 million in Q3 2024[9] - The company reported a total operating expense of $240,620,000 for Q3 2025, compared to $232,815,000 in Q3 2024, which is an increase of approximately 3.35%[28] - $135.2 million was invested in water system infrastructure during Q3 2025, a 14.8% increase from Q3 2024[6] - Capital investments for the nine months ending September 30, 2025, were $364.7 million, up 9.8% from $332.2 million in the same period of 2024[14] Dividends and Settlements - The Company declared its 323rd consecutive quarterly dividend of $0.30 per share, with a five-year compound annual dividend growth rate of 7.7%[6] - The Company received $24.2 million in additional proceeds from PFAS settlements in Q3 2025, totaling $34.8 million year-to-date[18] Regulatory and Compliance - The company has received regulatory approval for rate increases in Hawaii and is seeking a $4.9 million increase in Washington to recover higher operating costs[16][17] - The company anticipates challenges related to regulatory actions and environmental compliance impacting future performance[25] Balance Sheet and Assets - Total assets as of September 30, 2025, were $5,519,417,000, up from $5,180,283,000 as of December 31, 2024, indicating a growth of approximately 6.56%[27] - Total current liabilities increased to $729,919,000 as of September 30, 2025, from $538,364,000 at the end of 2024, marking an increase of about 35.54%[27] - The company’s cash and cash equivalents increased to $75,990,000 as of September 30, 2025, from $50,121,000 at the end of 2024, representing a growth of about 51.00%[27] - The company’s long-term debt as of September 30, 2025, was $1,103,819,000, slightly down from $1,104,571,000 at the end of 2024[27]

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Core Insights - California Water Service Group reported strong financial results for Q3 2025, reflecting a focus on expense control, infrastructure investment, and customer service [1][3]. Financial Highlights - Q3 2025 net income was $61.2 million with diluted EPS of $1.03, consistent with Q3 2024 [7]. - Revenue for Q3 2025 increased by $11.6 million or 3.9% to $311.2 million compared to $299.6 million in Q3 2024 [8]. - Operating expenses in Q3 2025 rose by $7.8 million or 3.4% to $240.6 million compared to $232.8 million in Q3 2024 [8]. - Year-to-date (YTD) 2025 net income was $116.7 million or $1.96 per diluted share, a decrease of 31.8% compared to YTD 2024 [8]. - YTD 2025 revenue decreased by $34.4 million or 4.2% to $780.2 million compared to $814.6 million in 2024 [8]. Capital Investment and Financing - The company invested $135.2 million in water system infrastructure during Q3 2025, a 14.8% increase from Q3 2024 [7]. - As of September 30, 2025, cash and cash equivalents totaled $76.0 million, with an additional short-term borrowing capacity of $255.0 million [10]. - The company announced the sale of $170.0 million in Senior Unsecured Notes and $200.0 million in First Mortgage Bonds [11][12]. Regulatory Updates - Inflation-based interim rate increases for California Water Service are authorized effective January 1, 2026, until a final decision is issued in the 2024 General Rate Case [7][14]. - Hawaii Water Service received approval to increase annual revenues by $4.7 million in its Waikoloa systems [16]. Community Engagement and Recognition - The company opened its seventh annual Firefighter Grant Program to support local fire departments [19]. - Recognized among the "World's Most Trustworthy Companies" for the third consecutive year and certified as a Great Place To Work for ten consecutive years [20]. Dividend Information - The company declared its 323rd consecutive quarterly dividend of $0.30 per share, with a five-year compound annual dividend growth rate of 7.7% [7][21].