Connecticut Water Upgraded to Strong Buy

On January 8, Zacks Investment Research upgraded Connecticut Water Service Inc. (CTWS - Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

This water utility has been producing consistent results and delivered positive earnings surprises in 7 of the last 10 quarters with an average beat of 12.9%. The regular dividend payment and increase in the annual dividend rate in each of the last 43 years make the stock attractive. The current dividend yield of 3.2% is higher than the industry average of 1.8%.

Connecticut Water reported third-quarter (ended September 30) results on November 9. Non-GAAP earnings per share came in at 67 cents, surpassing the Zacks Consensus Estimate of 56 cents by 19.4%. A dry summer had increased demand for water and saved costs at its Water activities segment were favorable for the quarter.

The company was able to refinance its long-term debt of $54.6 million in October on favorable terms. This deal will benefit the company as it will lower the annual interest expenses by $1 million.

The capital investment plan of $31.3 million for 2013 will enable the company to make infrastructure replacement and increase the reliability of its existing water system. Besides, the decision to acquire Biddeford and Saco Water Company in 2013 will help in expanding Connecticut Water’s customer base.

The Zacks Consensus Estimate for 2012 increased 18.48% to $1.53 per share as the majority of estimates were revised upward over the last 60 days.

Other Stocks to Consider

Besides this company, a few other water utilities are also performing well and have a favorable Zacks Rank. The stocks worth considering are American Water Works Company, Inc. (AWK - Snapshot Report), American States Water Company (AWR - Snapshot Report) and Aqua America Inc. (WTR - Snapshot Report). All these currently have a short-term Zacks Rank #2 (Buy).