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Water utility American Water Works Company Inc. (AWK - Snapshot Report) reported first quarter earnings per share of 32 cents, lagging the Zacks Consensus Estimate of 34 cents by 5.9%.

However, earnings were 14.3% higher than the year-ago figure of 28 cents. The improvement in earnings was attributable to additional revenue from new rates and lower income tax expenses.

Total Revenue

First quarter total revenue of $636.1 million was up 2.8% year over year from $618.6 million, but missed the Zacks Consensus Estimate of $654.0 million by 2.7%.  

The year-over-year outperformance was backed by favorable contribution from the regulated operation segment. New customer additions from acquired assets also benefited the top line.

Highlights of the Release

Total operating expenses in the reported quarter increased 2.8% to $471.9 million, primarily due to a 0.7% increase in operating and maintenance expenses and a 5.3% increase in general taxes.

The company has consistently paid dividends to its shareholders. On May 6, 2013, the board of directors approved an increase in the quarterly dividend rate to 28 cents from the earlier rate of 25 cents. The new dividend will be payable on Jun 3, 2013, to all shareholders of record as of May 24, 2013.

Capital expenditure during the quarter was $213.1 million, down from $233.4 million invested in the prior-year quarter.

Interest expenses decreased 2% in the first quarter to $78.1 million from $79.6 million in the year-ago quarter due to a decline in debt.

Guidance

American Water Works reaffirmed its 2013 earnings per share guidance in the range of $2.15 to $2.25 per share.

American Water Works intends to invest $950 million in 2013 in various projects to ensure the safety and reliability of its water operations.

Other Company Releases

Aqua America, Inc. (WTR - Snapshot Report) announced first-quarter 2013 operating earnings of 29 cents per share, 7.4% above the Zacks Consensus Estimate of 27 cents.

California Water Service Group (CWT - Snapshot Report) reported a loss of 3 cents in first-quarter 2013, wider than the Zacks Consensus Estimate of a loss of 1 cent.

Our View

American Water Works continues to make investments to maintain and upgrade its water and wastewater infrastructure.  Additionally, strategic acquisitions and agreements with other operators enable the company to enhance its customer base.

American Water Works Company currently has a Zacks Rank #3 (Hold). We rather prefer Zacks Rank #2 (Buy) stock American States Water Company (AWR - Snapshot Report). The latter is expected to release first quarter earnings on May 10. The Zacks Consensus Estimate is at 50 cents.

Voorhees, New Jersey-based American Water Works Company was founded in 1886. This water and wastewater utility caters to approximately 14 million residents across the country and parts of Canada.  With approximately 6,700 employees, the company’s market capitalization is $7.40 billion.

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