A month has gone by since the last earnings report for American Water Works (AWK Quick QuoteAWK - Free Report) . Shares have lost about 7.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

American Water’s Q1 Earnings Beat Estimates, Revenues Lag

American Water Works Company posted first-quarter 2022 operating earnings per share (EPS) of 87 cents, which surpassed the Zacks Consensus Estimate of 75 cents by 16%. The bottom line improved by 19.2% from the year-ago earnings of 73 cents per share.

Total Revenues

Total revenues of $842 million lagged the Zacks Consensus Estimate of $872 million by 3.4%. The top line also declined by 5.2% from the year-ago figure of $888 million.

Highlights of the Release

Total operating expenses for the first quarter amounted to $596 million, down 10.8% from the year-ago quarter’s $659 million, due to a decrease in the operating and maintenance expenses.

Operating income was $242 million, up 5.7% from the year-ago figure of $229 million. The new rates effective since Jan 1, 2022 will boost annual revenues by $79 million and the pending rate case, if approved without any change, will further increase the top line by $220 million.

American Water Works continues to expand operations through acquisitions and organic means. As of Mar 31, 2022, it added 1,800 customers to its customer base through four closed acquisitions in two states. AWK’s pending acquisitions (as of Mar 31), when completed, will add another 77,300 customers through 32 acquisitions. American Water Works added nearly 5,500 customers year to date from the closed acquisitions.

American Water Works invested $437 million, including $430 million for infrastructure improvements, in Regulated businesses for the first three months of 2022.

Segment Details

Regulated businesses’ net income in the first quarter of 2022 was $160 million compared with $135 million in the year-ago quarter.

Market-Based businesses reported a net loss of $2 million in the first quarter of 2022 and 2021.

Financial Highlights

Cash and cash equivalents amounted to $75 million as of Mar 31, 2022, down 35.3% from $116 million as of Dec 31, 2021.

The total long-term debt was $10,350 million as of Mar 31, 2022, up 0.1% from $10,344 million as of Dec 31, 2021.

Guidance

American Water Works affirmed the 2022 earnings guidance in the range of $4.39-$4.49 per share. The Zacks Consensus Estimate for 2022 earnings of $4.46 per share is higher than $4.44, the midpoint of the guided range. AWK reiterated the long-term earnings growth in the range of 7-9% for the 2022-2026 period.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, American Water Works has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Water Works has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.