Global Water: Rate Settlements and a Phoenix Boom Point to an Earnings Inflection
The utility's investment-heavy 2025 is finally set to pay off as GW-Santa Cruz moves to rate increases and organic growth reaccelerates.
GWRS · Earnings Call · 2026-08-13
The Capex Hangover and a Clearer Path to Rates
Global Water Resources reported Q2 2026 on August 13, and the headline is the same struggle that has defined the past few quarters: strong operational growth buried under the weight of near-record capital investment. But something important shifted on the call — a tangible milestone. CEO Ron Fleming opened with a promise:
Our goal is to also achieve long term earnings growth. We are committed to this objective which we believe will allow us to enhance shareholder value.
The 2025 capex program, which included recommissioning the Southwest Plant water reclamation facility, lifted rate base substantially, but also drove depreciation and operating costs. In Q2, net income recovered to $2.7M (from a loss in Q1), yet the drag is real. The key change is the rate review progress. The GW-Santa Cruz settlement hearing concluded, and a recommended order is pending. As General Counsel Christopher Krygier noted, the unanimous settlement contemplates net increased revenues of approximately $1.9 million effective later this year. That's a concrete inflection. The company also laid out a roadmap for four more rate cases filing in 2027, including GW-Palo Verde, which will address the historical Southwest Plant cost recovery — a primary overhang. Fleming put it plainly: “As I have been saying for many quarters now, we need new rates to keep up with all the investment and inflation that we have experienced in our utilities.” — Ron L. Fleming, President and Chief Executive Officer · 2026-08-13
Financially, the investment surge is visible in the capital expenditure trajectory. CapEx hit a quarterly peak of $17M in Q4 2025, and while it's now moderating, it has transformed the rate base. That's the fuel for future earnings, assuming regulators allow recovery.
Phoenix Growth Reaccelerates
Beyond rates, the demand side is improving. Management highlighted that organic connection growth ticked back up to 3.2% in the last three months — the highest in years. That's despite a temporary slowdown in building permits across the Phoenix MSA, which CEO Ron Fleming attributed to the broader economic development boom. In the Q&A, he explained: “it did increase a little bit in our major territory here in 2026... our actual organic growth rate ticked back up to the 3.2%” — Ron L. Fleming, President and Chief Executive Officer · 2026-08-13 The company is also seeing more multifamily and commercial projects, which diverge from traditional meter growth. The pending SR 347 widening is a structural catalyst for its largest service area, a theme the company has pushed for years. In a prior call, Fleming framed it as: “it's going to create a freeway-like access into the City of Maricopa... it's going to allow us to keep booming.” — Operator · 2025-11-13 That optimism now has numbers behind it.
Discipline and the Roadmap to 2028
Management is also tightening the ship. G&A stayed flat year-over-year at $4.3M, and CFO Mike Liebman indicated that's the plan. On capex, he said 2027 should be “lower than that, kind of somewhere around what historical norms have been.” The capital structure discipline remains a 50/50 equity/debt mix, with sensitivity to stock price and market conditions. Notably, the company was quick to confirm it was not affected by the recent cyberattacks on U.S. water infrastructure — a small but reassuring detail.
The regulatory calendar is now the clearest it's been in years: Santa Cruz rates by end of 2026, then a wave of filings for Palo Verde and Pima County utilities targeting 2028 rates. This is a classic regulated water utility story, but the shift from “rate base growth” to “earnings growth” is meaningful. The stock is already responding — up 13.6% over the past 90 days, though still well below its 2021 peak.
Prior concerns about the rate case's uniqueness remain, but the settlement shows progress. As Fleming noted on the March call, “the primary element of this rate case is very unique... we don't plan on replicating the situation again.” — Ron Fleming, President and Chief Executive Officer · 2026-03-05 That patience is now paying off. With a clear path to rate recovery, a resurgent Phoenix economy, and disciplined cost control, Global Water is positioning itself for the earnings inflection investors have been waiting for.