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Why Is American Water Works (AWK) Down 0.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for American Water Works (AWK - Free Report) . Shares have lost about 0.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American Water Works due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

American Water Q3 Earnings Top Estimates, Revenues Lag

American Water Works Company posted third-quarter 2021 earnings of $1.53 per share, beating the Zacks Consensus Estimate by a penny.

The bottom line also improved 4.8% year over year on the back of strong contribution from Regulated businesses. The strong quarterly earnings reflect the favorable impact of infrastructure investments, acquisitions and organic growth.

Total Revenues

Total revenues of $1,092 million lagged the Zacks Consensus Estimate of $1,096 million by 0.4%. The top line, however, improved 1.2% from the year-ago figure of $1,079 million.

Highlights of the Release

Total operating expenses for the quarter were $675 million, up 4.5% from the year-ago period.

Operating income was $417 million, down 3.7% from the year-ago figure. New rates effective since Jan 1, 2021 will add $153 million to annual revenues. The pending rate case, if approved without any change, will further increase the top line by $77 million.

The company continues to expand operations through acquisitions and organic means. Till Nov 1, 2021, it added 7,450 customers to the customer base through 14 closed acquisitions. Its pending acquisitions (as of Nov 1), when completed, will add another 82,700 customers to the customer base.

For the 12-month period ended Sep 30, O&M efficiency was 33.9%, reflecting a decrease of 30 basis points from 34.2% in the year-ago period. The improvement was due to a persistent focus on operating costs and an increase in operating revenues from Regulated businesses.

The company announced that it will sell the Homeowner Services Group to funds advised by Apax Partners LLP in a deal valued at nearly $1.275 billion. This decision will allow the company to focus more on core operations and invest the proceeds in Regulated businesses.

Segment Details

Regulated businesses’ net income was $273 million compared with $261 million in the year-ago quarter.

Market-Based businesses’ net income was $23 million, on par with the year-ago period.

Financial Highlights

Cash and cash equivalents amounted to $70 million as of Sep 30, 2021, down from $547 million on Dec 31, 2020. Total liquidity as of Sep 30, 2021 was $1,570 million.

Total long-term debt was $10,352 million as of Sep 30, 2021, up from $9,329 million at 2020-end.

Cash flow from operating activities for the first nine months of 2021 was $1,029 million compared with $988 million in the year-ago period. For the same period, capital expenditure was $1,205 million compared with $1,314 million in the year-ago period.


American Water reiterated its 2021 earnings guidance in the range of $4.18-$4.28 per share. The company’s long-term earnings growth is expected in the range of 7-9% for the 2022-2026 time period.

The company initiated its 2022 earnings guidance in the range of $4.39-$4.49 per share. The new guidance takes into consideration growth in Regulated Businesses and the announced sale of HOS. American Water has plans to invest $2.5 billion in 2022.

It aims to invest $13-$14 billion over the 2022-2026 time frame and $28-$32 billion in 10 years. The planned investment for the next 10 years reflects an increase of $6 billion from the prior guidance. The company’s O&M efficiency target remains at 30% for 2026.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

Currently, American Water Works has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


American Water Works has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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