American Water Works ( AWK Quick Quote AWK - Free Report) recently announced that its unit, Illinois American Water, will invest $4 million for constructing ultraviolet (UV) disinfection at the Streator water treatment plant. Two UV reactors will be installed and be capable of treating up to 6 million gallons of water a day and providing high-quality water to residents and businesses. Illinois American Water has been providing high-quality water and wastewater services to nearly 1.3 million people in Illinois and has been investing regularly to improve the quality of services. The decision to install UV reactors in the water treatment plant is part of an ongoing investment to offer high-quality services to its strong customer base. Potable water is scarce and recycling of water ensures the preservation of invaluable resources. This project will also enable Illinois American Water to meet more stringent water quality regulations associated with the Environmental Protection Agency’s Long Term 2 Enhanced Surface Water Treatment Rule. Upgrade of Infrastructure is Essential
The water and wastewater infrastructure of the United States is aging and massive investment will be required to upgrade the quality of infrastructure. Per the U.S. Environmental Protection Agency, a $473 billion investment is necessary to maintain and expand drinking water pipelines and $271 billion for wastewater pipelines to meet the demand over the next 20 years.
Due to the aging of the pipelines, frequent breaks in main lines are resulting in wastage of potable water and increasing contamination, so investor-owned water utilities operating in the United States are making systematic capital investments. American Water Works plans to invest $13-$14 billion in the 2022-2026 period and $28-$32 billion between 2022 and 2031 to upgrade and strengthen the existing water and wastewater infrastructure. Other water utilities like Essential Utilities ( WTRG Quick Quote WTRG - Free Report) , California Water Service Group ( CWT Quick Quote CWT - Free Report) and Middlesex Water ( MSEX Quick Quote MSEX - Free Report) have well-chalked-out capital investment plans to strengthen their infrastructure. Essential Utilities aims to invest $3 billion through 2023 to strengthen water and natural gas operations. The current dividend yield of WTRG is 2.12%. WTRG pulled off an earnings surprise of 1.45% in the last four quarters, on average. The long-term (three to five years) earnings growth of Essential Utilities is pegged at 6.2%. California Water Service reaffirmed 2021 capex estimates within the $270-$300 million range. Also, the midpoint of CWT’s capital expenditure planned for 2022, 2023 and 2024 is $355 million, $360 million and $365 million, respectively. The current dividend yield of CWT is 1.42%. The Zacks Consensus Estimate for 2022 earnings for California Water Service has moved up 3.3% in the past 90 days. Middlesex Water has plans to invest $200 million during the 2022-2023 period to strengthen its water and wastewater infrastructure to provide services to customers in a safe, reliable and efficient manner. The current dividend yield of MSEX is 1.09%. The Zacks Consensus Estimate for Middlesex Water’s 2022 earnings indicates 14.4% year-over-year growth. Shares of Essential Utilities, California Water Service, and Middlesex Water have returned 6.3%, 8.6%, and 15%, respectively, in the past six months. Price Performance
Shares of American Water have gained 1.2% in the past six months compared with the
industry’s 3.5% rally.
Image Source: Zacks Investment Research
American Water Works currently has a Zacks Rank #4 (Sell).
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