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California Water Service (CWT) Unit to Acquire Monterey Water

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California Water Service Group (CWT - Free Report) announced that its unit, New Mexico Water Service, signed an agreement to acquire the assets of Monterey Water Company, a water utility located in Valencia County, NM. The acquisition is subject to the Commission’s approval and will become part of New Mexico Water’s Rio Del Oro service area.

As part of the purchase, New Mexico Water will own and operate the Monterey Water system, which currently serves 380 residential customers. The acquisition also includes about 100 undeveloped lots that may be served in the future. In addition to the new Monterey Water customers, New Mexico Water currently serves about 16,000 people through 8,500 water and wastewater service connections in its service territory.

Acquisitions & Investments

The U.S. water utility industry is fragmented and upgrading the aging assets to provide high-quality services is the need of the hour. Per the Environmental Protection Agency, at present, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. The aging water and wastewater pipelines are currently a big concern for the industry and require consistent investments to maintain and upgrade infrastructure.

California Water Service invested $293.2 million in 2021 and expects to invest $1,080 million in the 2022-2024 period for upgrading infrastructure. California Water Service makes strategic acquisitions to expand operations in the United States. In 2021, CWT units completed four acquisitions, which added 585 water connections and 3000 wastewater connections.

Zacks Rank & Price Performance

California Water Service presently has a Zacks Rank #3 (Hold). In the past year, shares of California Water Service have rallied 4.9%, underperforming the industry’s rise of 11.3%.

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

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Acquisitions by Water Utilities

Utilities from the water industry that are expanding operations through acquisitions are American Water Works (AWK - Free Report) , Essential Utilities (WTRG - Free Report) and Consolidated Water (CWCO - Free Report) .

American Water Works continues to widen its market footprint through strategic acquisitions. In 2021, the company expanded the customer base by 20,000 through 23 closed acquisitions in six states. American Water Works plans to invest the $13-$14 billion range in the 2022-2026 period and the $28-$32 billion band in the 2022-2031 period. In 2022, AWK is planning to make capital investments of nearly $2.5 billion, with a major portion to be utilized for infrastructure improvements in regulated businesses.

American Water Works’ long-term (three to five years) earnings growth is currently pegged at 8.1%. The Zacks Consensus Estimate for American Water Works’ 2022 earnings implies year-over-year growth of 4.7%.

In 2021, Essential Utilities closed two acquisitions, which added 7,700 new customers. During the six-year period ended Dec 31, 2021, Essential Utilities expanded utility operations by completing many water and wastewater acquisitions, which, in turn, added 94,000 new customers. In 2022, the company aims to invest $1 billion in the water and natural gas segments and $3 billion in the 2022-2024 period to fortify operations and efficiently serve the expanding customer base.

Essential Utilities’ long-term earnings growth is currently pegged at 6.1%. The Zacks Consensus Estimate for WTRG’s 2022 earnings implies year-over-year growth of 6.6%.

Consolidated Water acquired 100% interest in Aerex Industries, Inc., a U.S. original equipment manufacturer and service provider of a wide range of products and services with industrial water treatment. Consolidated Water also acquired 51% of PERC Water Corporation, a water infrastructure provider, which expanded Consolidated Water’s product offerings and presence in the United States. These acquired units continue to boost CWCO’s performance and expand the customer base.

Consolidated Water’s long-term earnings growth is currently pegged at 8%. The Zacks Consensus Estimate for Consolidated Water’s 2023 earnings implies year-over-year growth of 50%.

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