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Introduction & Market Context
California Water Service Group (NYSE:CWT) presented its second quarter 2025 earnings results on July 31, 2025, reporting a slight increase in quarterly earnings per share despite mixed year-to-date performance. The company’s stock closed at $44.66, down 0.51% on the day of the presentation, reflecting cautious investor sentiment despite the company’s strategic growth initiatives.
The water utility continues to focus on capital investments, rate base growth, and geographic expansion, particularly in wastewater services and the Texas market. This comes as the company navigates regulatory processes in California and addresses PFAS contamination challenges across its service territories.
Quarterly Performance Highlights
California Water Service reported Q2 2025 operating revenue of $265.0 million, up from $244.3 million in Q2 2024 (GAAP). Net income reached $42.2 million with diluted earnings per share of $0.71, compared to $40.6 million and $0.70 per share in the same period last year.
As shown in the following chart of quarterly financial results:
On a year-to-date basis, the company’s performance showed more significant variations. While operating revenue increased to $468.9 million from $427.6 million (non-GAAP comparison), YTD earnings per share of $0.93 represented a substantial decline from the $1.90 GAAP EPS reported in the first half of 2024.
The following chart illustrates the year-to-date financial performance:
The company emphasized non-GAAP comparisons in its presentation, noting that when adjusting for the impact of 2023 interim rate relief on 2024 results, YTD 2025 EPS actually exceeded YTD 2024 non-GAAP EPS by 15%.
Detailed Financial Analysis
A bridge analysis of the changes in diluted EPS from Q2 2024 to Q2 2025 reveals several factors influencing performance, including revenue adjustments, increased depreciation and interest expenses, and reconciliation of uncollectible accounts:
California Water Service maintains a strong liquidity position to support its capital investment program and strategic acquisitions. As of June 30, 2025, the company reported $45.6 million in unrestricted cash, $50.5 million in restricted cash, and $240.0 million in available credit. The company’s Cal Water subsidiary maintains an A+/stable credit rating from S&P Global.
The company’s liquidity profile is illustrated in the following chart:
Shareholders continue to benefit from the company’s dividend program, which reached its 322nd consecutive quarterly payment. The announced annual dividend is expected to yield $1.20 in 2025, with a one-time special dividend bringing the total to $1.24, representing a 10.71% increase over the previous year and a five-year dividend CAGR of 7.7%.
Strategic Initiatives
California Water Service’s capital investment strategy remains a key driver of future growth. The company invested $119.4 million in new utility plant during Q2 2025, bringing total year-to-date investments to $229.5 million, 7% ahead of the record amount invested during the same period in 2024.
The company’s capital investment is projected to significantly outpace depreciation, as shown in the following chart:
These investments are expected to drive substantial growth in the company’s regulated rate base, which is projected to exceed $3.3 billion by 2027, as illustrated below:
A significant strategic development is the company’s expansion into wastewater services through the Silverwood Development project. In June 2025, California Water Service signed agreements with an affiliate of DMB Development to own and operate wastewater and recycled water systems for a new master-planned community in San Bernardino County. At full buildout, the development is expected to have more than 15,000 customer connections, with Phase-1 investment ranging between $60.0 million and $70.0 million.
The company is also expanding its presence in the Texas market through its majority stake in BVRT Water Resources. This strategic investment targets high-growth areas near Austin, Texas, with the following customer growth trajectory:
Forward-Looking Statements
California Water Service’s 2024 California General Rate Case (GRC) remains a critical regulatory process that will impact future financial performance. The company reported that hearings before the Administrative Law Judge occurred in May 2025, with briefs filed in July 2025. The GRC requests rate adjustments to generate revenue increases of 17.1% for 2026, 7.7% for 2027, and 8.1% for 2028.
The company also provided an update on its PFAS remediation efforts. In May 2025, the company received $10.6 million in net proceeds from a settlement with 3M Company (NYSE:MMM), the first of ten installments expected from this settlement. Additional proceeds from settlements with three other responsible parties are expected beginning in late 2025.
On the sustainability front, California Water Service reported a 23.5% reduction in Scope 1 and 2 greenhouse gas emissions over the base year 2021 and achieved a B- rating on both its annual CDP Climate Questionnaire and Water Questionnaire.
Looking ahead, the company’s financial outlook will be significantly influenced by regulatory decisions, the pace of capital investments, and the successful integration of new service territories in California and Texas. While quarterly performance showed modest improvement, the substantial year-to-date decline in GAAP earnings highlights the challenges the company faces in maintaining consistent financial growth amid significant infrastructure investments and regulatory processes.
Full presentation:
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