Preheat oven to 400 degrees F (200 degrees C). Grease a baking sheet.
Whisk 2 cups flour, baking powder, sugar, and salt together in a bowl; cut shortening into flour mixture with a pastry cutter until mixture is crumbly. Mix in egg and milk until incorporated. Turn dough out onto a well-floured work surface and knead for 1 minute.
Roll dough out to a thickness of 3/4 to 1-inch thick, cut with a biscuit cutter, and place biscuits onto prepared baking sheet. Brush tops of biscuits with melted butter.
Bake in the preheated oven until biscuits are golden brown, 8 to 10 minutes.
Cook and stir sausage in a large skillet over medium heat until browned and crumbly, about 10 minutes. Drain excess grease. Stir 1/4 cup butter into sausage until butter has melted and mix in 1/4 cup flour until thoroughly combined. Pour evaporated milk and water into sausage mixture, bring gravy to a simmer, and reduce heat to low; simmer gravy until thickened, about 5 minutes. Season gravy with salt and black pepper to taste.
Serve biscuits with sausage gravy.
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