Water Works Co., Inc (AWK - Analyst Report)
to what you might believe, the most important commodity is not crude
natural gas, silver or even gold - humans can survive without any or all of them. The one essential commodity that
humans cannot live without is potable water.
most interesting is that there currently is no way to “trade it” or to
of this integral part of our lives or its scarcity. American Water
Works is one
of the ways you can invest in water, without having to build a tower in
neighborhood to store it.
Description & Developments
Water Works Company is a water and wastewater utility company that
approximately 15 million people with drinking water, wastewater and
water-related services in over 30 states and two Canadian provinces.
There is a good chance you are drinking water that is treated by
is something we obviously can’t live without; we need clean water to
life both directly and for our crops.
modern society we use fresh, clean water for more than just sustenance.
about watering your lawn, bathing, plumbing, etc. According
to the US geological survey, the
average person uses about 80-100 gallons of water per day.
is available, but very limited in comparison to salt water, especially in certain
not all of it is drinkable. Less than 5% of our total water supply on Earth is
While there may seem like plenty of drinking water is available,
consider the facts:
- The average human needs about two quarts per day of
drinking water to survive.
- The World Bank
estimates the global population to be about 6.8 Billion. (As of the end
- We need to consume at least 13.8 billion
quarts of water daily, just to survive. That is the
equivalent of 83 million barrels a day. (using an oil
to the CIA, the world consumes over 96 million barrels of oil per day –
just a bit higher than the bare minimum drinking water humans on Earth
reality is that it takes about 3,000
liters of water, to produce enough food to satisfy one
daily dietary needs (farming, irrigation, etc), not including all the other things
we use fresh water for.
Believe it or not, our daily demand of fresh water is more like 121 BILLION
BARRELS PER DAY, which dwarfs the amount of daily oil usage. This is a serious
Water is a mid cap company that is trading at about 19 times trailing
(P/E). Looking forward, Zacks
sees American Water’s P/E dropping to 16, with no change in price from
levels. American Water was just upgraded to a Zacks Rank 1 on Friday
triggered an alert in my system.
are expected to earn $1.78 in FY2011 according to the Zacks Consensus
noticed several analysts upgrading their forward
earnings outlooks for FY2012. The
company has been showing strong growth over the past 3 years and
declared a dividend of 23 cents per quarter. (2.9% yield).
the most recent quarter’s report they showed earnings growth of over
42% year over year.
are for American Water to make .33
cents this quarter when they report on January 24th (Zacks Consensus Estimate). Future
earnings estimates have been on the
rise over the past months, and all 15 estimates are higher now than
they were a
year ago, both for the current report and for FY 2012.
Water surprised analysts to the downside by 9%
last quarter. They reaffirmed their 2011
earnings outlook in November 2011 for FY2011.
Performance & Technicals
American Water is currently trading just $1.00 under its 52 week
high of $32.78. Since June of 2009, AWK
has been in a strong
growth pattern. 2011 was very good for
this low beta stock (beta = .29), it returned almost 27% in capital
Water has also outpaced the S&P 500 by 23% over
the past year, but has been basically flat against the index for the
and 90 day range.
Water remains in a solid bullish channel and is
firmly above its 50 and 200 day moving averages of $31.16 and $29.68
Remember that this is a low volatility stock
relative to the S&P 500.
think the short term and longer term outlooks for this stock look
positive. Like other utilities, this
stock will have a slightly defensive stance compared to the overall
A Levy is the Momentum Stock Strategist for Zacks.com. He is also the
charge of the market-beating Zacks
Whisper Trader Service.