American Water Works (AWK) is entering a period of declining regulatory risk as it advances toward closing its merger with Essential Utilities (WTRG) without a pending water case in the largest Pennsylvania jurisdiction for either company, UBS Securities said in a note Thursday.

The investment firm said remaining approval risk is limited, with orders or settlements now pending in six of the eight jurisdictions needed to close the deal. UBS is watching a proposed decision on the merger in Illinois due Friday, though it noted the state's "no harm" standard narrows the range of possible outcomes, and it expects a workable recommendation.

UBS said the merger remains on track to close by the end of the first quarter of 2027 and would be 5% accretive to earnings before synergies, while expanding American Water's growth territory and offering optionality through a potential post-closing sale of Peoples Gas.

The brokerage is also tracking details of a settlement reached in the Pennsylvania review, expected Sept. 15.

UBS reiterated its buy rating on the stock and raised the price target to $162 from $156.

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