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American States Water's (AWR) Capex, Customer Base Bode Well

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American States Water Company’s (AWR - Free Report) planned investments in strengthening its aging water infrastructure along with a strong utility customer base act as tailwinds. Also, consistent performance from its American States Utility Services (ASUS) unit benefits its operations.

The company has a trailing four-quarter earnings surprise of 3.63%, on average.

What’s Aiding the Stock?

After investing $37.1 million in first-quarter of 2021, the company expects to spend in the range of $120-$135 million during 2021 toward regulated utilities. Golden State Water Company (GSWC), a subsidiary of American States Water Company, filed a general rate case application for all water regions and at the general office for new rates for the years 2022, 2023 and 2024. The new application includes capital budget requests of $450.6 million for the above-mentioned three-year period. Also, the utility has a solid customer base and it is adding more electricity and water utility customers at a slow but steady pace through acquisitions and organic means.

American States Water Company’s Water segment is a major contributor to its total revenues. Notably, ASUS has long-term contracts with 11 military bases, which are 50-year firm fixed-price deals. The long-term defense contracts lend stability to the company’s earnings. This unit is expected to contribute 45-49 cents per share to its current-year earnings.

Headwinds

American States Water Company’s dependence on a single state California for recognizing a significant chunk of its earnings is a huge downside. Also, the company operates in a highly regulated environment and any changes in the existing laws and conditions could affect its business.

Zacks Rank & Price Performance

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have gained 3.7% in the past six months, outperforming the industry’s rise of 2.1%.

Stocks to Consider

A few better-ranked utilities are Essential Utilities Inc. (WTRG - Free Report) , NewJersey Resources Corporation (NJR - Free Report) and UGI Corporation (UGI - Free Report) , all carrying a Zacks Rank #2 (Buy) at present.

Essential Utilities pulled off average earnings surprise of 4.60% in the last four quarters. It has a long-term (three-five years) earnings growth rate of 6.22%.

The Zacks Consensus Estimate for NewJersey Resources’ 2021 earnings has moved 16.8% north in the past 60 days. It has a long-term earnings growth rate of 7.10%.

UGI Corp. delivered average beat of 58.23% in the last four quarters. It has a long-term earnings growth rate of 8%.

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