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American Water (AWK) to Invest in Water Main in Pennsylvania

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American Water Works (AWK - Free Report) announced that its unit, Pennsylvania American Water, is going to invest $1.5 million to replace 6,000 feet of aging water main in Wilkes-Barre to ensure high-quality water services for customers and increase water flow for firefighting. The company will start replacing the existing four- and six-inch cast iron pipes with new six- and eight-inch ductile iron pipes along several city streets.

Miles of water mains are aging and nearing the end of effective service life as a consequence of frequent breakage, which is in turn resulting in the wastage of valuable potable water. The company aims to replace the pipeline that was installed in early 1900s.

Pennsylvania American Water has been investing on a regular basis to upgrade its existing water and wastewater infrastructure, as well as expand operations through strategic acquisitions. This company is efficiently providing water and wastewater services to nearly 2.4 million people.

Investment Serves as Lifeline for Pipelines

Potable water supply on a 24x7 basis is essential for maintaining hygiene and performing daily chores. Millions of miles of pipelines, storage tanks, pumps, desalination plants, and water refineries work in tandem to deliver clean as well as potable water for meeting daily requirements. Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to aging of the existing water infrastructure. The breaks in the pipeline result in the wastage of 6 billion gallons of potable water each day and add to the loss of water utility operators.

The only solution to the above problem is to update and replace the aging water infrastructure at regular intervals but a huge amount of investment is required to do the same. Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand drinking water and wastewater services 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 year.

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

California Water Service currently has a dividend yield of 1.64%, which is better than the industry average. The Zacks Consensus Estimate for 2021 and 2022 earnings per share of the company has moved up 3.5% and 6.8%, respectively, in the past 60 days.

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