Consolidated Water Co. Ltd. (CWCO) Q3 2026 earnings review
Consolidated Water wins big 2027 contracts, but profit drops
Consolidated Water, which builds and runs desalination and water treatment plants, is stuck in an earnings gap between big projects. Third-quarter revenue dropped 12% from a year ago as older US construction and plant-operating contracts wound down, and profit per share fell by more than half to $0.15. Chief executive Rick McTaggart pushed the start of the $150 million Hawaii construction phase into the first half of 2027, missing the earlier goal to begin before year-end.
| Revenue | $30.9M -11.9% from a year ago |
|---|---|
| Profit per share from continuing operations | $0.15 $0.34 a year ago (-56%) |
| Services segment revenue | $9.8M -31.7% from a year ago |
| Hawaii construction start plan | Pushed to H1 2027 prior plan: before the end of 2026 |
⚖️ Verdict: 🔴 Bearish
The story got worse because the Hawaii construction start slipped for a fourth time while the US services division swung to an operating loss. On the positive side, the company cleared Hawaii's historic preservation review and won a $40 million California plant contract for spring 2027, rebuilding its future workload.
The question now is whether 2027 brings a lasting step-up in profit or just another temporary construction boom while recurring plant-operating contracts shrink. One view is that Hawaii, California and record Florida equipment orders will transform earnings; the other is that permit delays and lost operating contracts will keep dragging on margins. Receiving full notice to proceed in Hawaii during the first half of 2027 will settle the timing.
🐂 Bull Case
New California and Florida Orders Rebuild Backlog
Consolidated Water builds and operates water plants and makes treatment equipment, so it needs new municipal contracts to replace completed US projects. Chief executive Rick McTaggart said "All of this bodes well for a strong 2027 for our manufacturing business." In October the company won a $39.8 million contract in Pismo Beach, California "to provide a new local, drought-resistant water supply and help protect the groundwater basin from seawater intrusion".
- California design-build award: $39.8 million over about 24 months, with construction starting in spring 2027
- Florida equipment orders: $10.1 million for membrane and filter gear, scheduled for delivery in November 2027
- Near-term manufacturing bids: $10 million awaiting award in Q4, plus $45 million of Florida projects going out for bid within six months
- Customer prepayments and contract liabilities: $14.3 million, up 22.2% from a year ago by our math
These wins matter because US construction sales fell 45.2% this quarter as older Colorado and California jobs wound down. The Pismo Beach build and the record Florida order give the water treatment group nearly $50 million of signed work for 2027 and 2028, before counting the Hawaii project.
What to watch: the outcome of the $10 million in manufacturing bids decided in the fourth quarter. Winning a large share would lift factory utilization in early 2027 before the November 2027 Florida delivery.
Commercial Pricing and Pass-Throughs Lifted Water Sales
The utility division sells desalinated water directly to homes and resorts in Grand Cayman (retail) and to government utilities in the Bahamas and Cayman Islands (bulk). On August 1, a new 25-year Grand Cayman license cut base customer rates. Even so, McTaggart noted that "higher energy pass-through charges, a 1% increase in water sales volume, and an increased rate for a major commercial customer increased retail revenue".
Retail sales rose 5.7% from a year ago to $8.2 million, while bulk sales climbed 20.8% to $10.1 million on higher Bahamas fuel pass-through billings and two new plants on Cat Island. Higher energy charges and the retail rate reset raised cost of revenue — the direct cost of producing water — by 4.7 percentage points of sales in retail and 1.3 percentage points in bulk. Still, combined utility gross profit grew 4.6% to $7.6 million.
What to watch: fourth-quarter retail gross profit, the first full quarter under the August 1 rate cut. It will show how much of the lower residential rate the commercial price hike can offset.
🐻 Bear Case
Hawaii Construction Slipped Again Into 2027
The company's largest growth project is a $204 million contract to design, build and run a seawater desalination plant in Kalaeloa, Hawaii, including more than $150 million of construction backlog. McTaggart said "Once construction of this project commences in the first half of 2027, we expect it to have a significant impact on our revenue and earnings." That timeline marks a fourth delay for a build previously expected to start before the end of 2026.
In July the Honolulu water board released about $6 million "for critical long-lead equipment for our planned Kalaeloa desalination facility". McTaggart also reported that "Recent approvals from the State Historic Preservation Division and the Hawaii Department of Health allow us to pursue remaining permits and approvals". Yet clearing the historic preservation review did not unlock immediate groundbreaking, because the start remains "subject to obtaining the remaining permits and approvals".
What to watch: full notice to proceed from the Honolulu water board in the first half of 2027. Another delay would leave 2027 construction sales relying only on the smaller Pismo Beach project.
Services Lost Money as Plant Contracts Ended
The services division builds treatment plants and runs them under recurring operations and maintenance (O&M) agreements. Third-quarter services sales dropped 31.7% from a year ago to $9.8 million. Construction sales fell 45.2% to $3.5 million between major builds, while O&M sales fell 20.9% to $6.1 million "primarily due to the expiration of contracts with three customers in California in the first quarter of 2026".
Because revenue shrank faster than plant staffing and overhead, direct cost of revenue in services jumped 13.4 percentage points to 86.5% of segment sales. That pushed the division into a $258,000 operating loss, down from a $1.91 million operating profit a year ago. Across the whole company, general and administrative expenses (corporate and office overhead) also rose 4.1 percentage points to 24.7% of total revenue.
What to watch: quarterly O&M revenue, which stayed near $6.1 million in both Q2 and Q3. A drop below $6 million next quarter would mean customer losses are still outpacing new municipal contracts.
Risks this quarter didn't answer
Three standing concerns either lacked detail in the earnings release or showed no improvement this quarter.
- Overdue Bahamas government bills: total company receivables rose 12.7% from last quarter to $32.2 million, and the quarterly filing will show how much the Bahamas utility owes.
- Unspent cash pile: cash sits at $129.2 million with no share buybacks or acquisitions announced.
- Lumpy factory sales: manufacturing revenue fell 39.7% from a year ago to $2.8 million, rising 4.5% from last quarter while awaiting 2027 orders.
👓 Other Themes
Grand Cayman Rainfall Cut Nine-Month Water Volume
Weather in the Caribbean swings demand for desalinated water because residents and resorts use less tap water for irrigation when it rains. Over the first nine months of 2026, heavier rainfall on Grand Cayman cut retail water volume by 4.1% compared with an unusually dry 2025. Weather returned to normal in the third quarter, allowing volume to edge up 1% from a year ago.
💲 Other KPIs
Uncollected customer bills rose 12.7% from last quarter and 11.2% from a year ago, even as total revenue fell 11.9%. In recent quarters, slow payments from the Bahamas government water utility and higher fuel pass-through billings have driven swings in this balance.
Cash dipped 2.6% from last quarter's $132.6 million peak but remains up 4.5% from a year ago. Consolidated Water paid off its remaining tiny debt balance this quarter and pays $0.14 per share in quarterly dividends, leaving working capital at $145.1 million.
The number of diluted shares rose 0.4% from a year ago. The Caribbean and US water operator has not bought back shares, issuing small amounts of stock for employee compensation.
🔮 Guidance
Unchanged. Management continues to "expect full-year 2026 manufacturing revenue to be below 2025 levels" of $18.7 million. With $6.9 million booked in the first nine months, by our math the ceiling for the fourth quarter is $11.8 million, nearly four times last year's $3.0 million fourth quarter. Because the $10.1 million Florida order ships in November 2027, full-year 2026 factory sales will finish far below 2025.
❓ Key Questions
Which permits still block the Hawaii construction start?
The company cleared the historic preservation and health department reviews, which investors viewed as the main bottlenecks. Yet the construction start slipped from late 2026 to the first half of 2027. Which specific agency approvals remain outstanding?
Why did customer bills rise while revenue fell?
Accounts receivable climbed $3.6 million from last quarter to $32.2 million even though total revenue dropped. How much of the increase came from overdue bills at the Bahamas water corporation versus timing on US construction contracts?
What will the company do with $129 million in cash?
Even with the Pismo Beach and Hawaii builds starting in 2027, cash sits at $129.2 million and long-term debt is zero. How much working capital do those two projects require, and why not return the excess to shareholders?
Can new O&M contracts replace the lost California work?
Operations and maintenance revenue fell by $1.6 million from a year ago after three California contracts expired in the first quarter. What is the bidding pipeline for standalone O&M work before the Pismo Beach and Hawaii plants open?