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Here's Why You Should Hold on to American Water (AWK) Stock
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Shares of American Water Works Company (AWK - Free Report) have outperformed the Zacks Water Supply industry’s rally in the last 12 months. The company’s shares have returned 22.2% compared with the industry’s gain of 20.3%.
The water and wastewater infrastructure is outdated and a massive investment is required to upgrade and expand the existing system. American Water Works aims to invest $6.7-$7.3 billion during 2017-2021 to improve its infrastructure.
A major chunk of the expenditure worth $5.9 billion will be directed to strengthen regulated businesses. More than 90% of net income comes from regulated operations. These investments will help the company drive earnings by 7-10% per year in the aforesaid period from the 2015 level.
The company is also benefiting from the rate increase since the beginning of 2017. The new water rates (effective since Jan 1, 2017) will increase the company’s total revenues by $66 million. The company is awaiting final order on pending rate cases worth $321 million in various jurisdictions.
The company continues to expand market footprint through strategic acquisitions. In 2016, the company added 42,000 customers. Another 43,700 customers will be added when pending acquisitions are completed in 2017. Year to date, American Water Works has added 27,700 consumers through closed acquisitions and organic growth.
Fluctuating weather conditions are lowering demand for water and the rising interest rates will surely increase the capital servicing costs of American Water Works. The debt-to-capital ratio of the company is 54.77%, higher than the S&P 500 ratio of 41.72%.
In the last 30 days, the Zacks Consensus Estimate for the company’s 2017 and 2018 earnings per share inched up 0.3% and 0.6% year over year, respectively. The Zacks Consensus Estimate for 2017 and 2018 total revenues rose 3.63% and 5.29% year over year, respectively.
PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. Its 2017 estimates increased to $1.86 from $1.85 per share in the last 30 days.
IDACORP reported third-quarter 2017 earnings from continuing operations of $1.80 per share, beating the Zacks Consensus Estimate of $1.66 cents by 8.4%. Its 2017 estimates increased to $4.08 from $4.00 per share in the last 30 days.
UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents by 45.5%. Its 2017 estimates increased to $2.03 from $1.98 per share in the last 30 days.
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Here's Why You Should Hold on to American Water (AWK) Stock
Shares of American Water Works Company (AWK - Free Report) have outperformed the Zacks Water Supply industry’s rally in the last 12 months. The company’s shares have returned 22.2% compared with the industry’s gain of 20.3%.
The water and wastewater infrastructure is outdated and a massive investment is required to upgrade and expand the existing system. American Water Works aims to invest $6.7-$7.3 billion during 2017-2021 to improve its infrastructure.
A major chunk of the expenditure worth $5.9 billion will be directed to strengthen regulated businesses. More than 90% of net income comes from regulated operations. These investments will help the company drive earnings by 7-10% per year in the aforesaid period from the 2015 level.
The company is also benefiting from the rate increase since the beginning of 2017. The new water rates (effective since Jan 1, 2017) will increase the company’s total revenues by $66 million. The company is awaiting final order on pending rate cases worth $321 million in various jurisdictions.
The company continues to expand market footprint through strategic acquisitions. In 2016, the company added 42,000 customers. Another 43,700 customers will be added when pending acquisitions are completed in 2017. Year to date, American Water Works has added 27,700 consumers through closed acquisitions and organic growth.
Fluctuating weather conditions are lowering demand for water and the rising interest rates will surely increase the capital servicing costs of American Water Works. The debt-to-capital ratio of the company is 54.77%, higher than the S&P 500 ratio of 41.72%.
In the last 30 days, the Zacks Consensus Estimate for the company’s 2017 and 2018 earnings per share inched up 0.3% and 0.6% year over year, respectively. The Zacks Consensus Estimate for 2017 and 2018 total revenues rose 3.63% and 5.29% year over year, respectively.
Zacks Rank & Key Picks
American Water Works currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same sector are PNM Resources, Inc. (PNM - Free Report) , IDACORP Inc. (IDA - Free Report) and UNITIL Corporation (UTL - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. Its 2017 estimates increased to $1.86 from $1.85 per share in the last 30 days.
IDACORP reported third-quarter 2017 earnings from continuing operations of $1.80 per share, beating the Zacks Consensus Estimate of $1.66 cents by 8.4%. Its 2017 estimates increased to $4.08 from $4.00 per share in the last 30 days.
UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents by 45.5%. Its 2017 estimates increased to $2.03 from $1.98 per share in the last 30 days.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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