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American Water (AWK) Arm Invests $1.3M for Pipeline Upgrade

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American Water Works (AWK - Free Report) announced that its subsidiary, Missouri American Water, has invested $1.3 million to replace nearly 3,100 feet of aging water mains along Big Bend Boulevard in Webster Groves. The project includes replacing aging 6-inch, 8-inch and 12-inch water lines with new ductile iron main from Grant Rd. to Glendale Rd.

The $1.3-million Big Bend project is part of a larger $15-million investment plan that will last through 2023. The replacement of old and aged pipelines will improve reliability of the system and fire flow capacity in the region.

Investment Essential for Water Space

Millions of miles of pipelines, storage tanks, pumps, desalination plants, and water refineries work together to deliver clean, as well as potable water for meeting daily requirements. However, a substantial portion of the water infrastructure — primarily the water pipelines — is gradually approaching toward the end of effective service life. Per the findings of the American Society of Civil Engineers, nearly 300,000 line breaks occur every year in the United States due to the aging of existing water infrastructure. The pipeline breakage results in the wastage of millions of gallons of potable water each day and additional loss for water utility operators.

So, replacing the aging water mains with new pipelines has become quite essential to ensure the safety of water quality, and avoid interruption of water as well as wastewater services due to breakage. The increasing demand for water also necessitates expansion of the existing water and wastewater infrastructure.

Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years. American Water continues to make investments in its infrastructure to upgrade, enhance and maintain the same. The company has plans to invest $10.4 billion in the 2021-2025 time period and $22-$25 billion in the next decade.

Essential Utilities (WTRG - Free Report) is also making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest nearly $3 billion through 2023 to rehabilitate and strengthen water, as well as natural gas pipeline systems. Another water utility, Global Water Resources (GWRS - Free Report) is making acquisitions and the necessary investments to expand as well as strengthen operations, and upgrade the acquired assets for providing efficient services to customers.

Price Performance

Shares of American Water have outperformed the industry in the past three months.

Zacks Rank and Key Pick

American Water currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is California Water Service Group (CWT - Free Report) , currently having a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for earnings per share of California Water Service for 2021 and 2022 has moved up 3.5% and 6.8%, respectively, in the past 60 days.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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