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American Water (AWK) Unit to Acquire Sewer Assets for $1M
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American Water Works Company (AWK - Free Report) has announced that its subsidiary, Pennsylvania American Water, will acquire the Sadsbury Township Municipal Authority Sanitary Sewer Collection System for $990,000. The sewer collection system serves 250 properties.
The aging of crucial water and wastewater infrastructure is concerning for the water industry of the United States. After completing the acquisition, Pennsylvania American Water plans to invest $1.3 million in the first five years of ownership to improve the overall wastewater infrastructure of the acquired assets. The acquisition of wastewater assets will extend American Water Works’ high-quality services to its new customers.
Fragmented Industry Needs Consolidation
According to the Environmental Protection Agency, more than 50,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers at present. Due to a large number of small operators in the industry and a lack of adequate funds, at times, essential upgrades and repairs of infrastructure get delayed.
Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. The breaks in the pipeline result in the wastage of 6 billion gallons of potable water each day and add to the losses of water utility operators. Aging and a lack of timely maintenance are major contributors to pipeline breaks.
The acquisition of small units by larger utilities ensures necessary investments for the upgrade of infrastructure and the continuation of high-quality services to customers. American Water Works continues to widen its market footprint through strategic acquisitions.
Utilities Continue to Consolidate
Other water utilities like California Water Service Group (CWT - Free Report) , SJW Group (SJW - Free Report) and Essential Utilities (WTRG - Free Report) in the water utility space are expanding operations through systematic acquisitions.
California Water Service recently received approval to acquire the water system assets of Skylonda Mutual Water Company. The buyout is scheduled to close later this year, subject to customary closing conditions. Also, in June 2022, CWT announced that its unit, Texas Water Service, closed the acquisition of Railyard Utility’s wastewater system by collaborating with BVRT Utility Holding Company.
The Zacks Consensus Estimate for California Water Service's 2023 earnings suggests year-over-year growth of 21.7%. The current dividend yield of the company is 1.63%.
SJW Group completed more than 25 acquisitions in the 2010-2021 time frame and expanded operations. In January 2022, it closed the acquisition of Texas Country Water in Comal, TX. The deal added more than 1,900 water and wastewater customers to the existing customer base. This has been the fourth Texas acquisition by SJW Group in the past 12 months. In the next five years, the company plans to invest $1.5 billion to further strengthen its infrastructure.
The Zacks Consensus Estimate for SJW Group's 2022 and 2023 earnings implies year-over-year growth of 15.3% and 6.6%, respectively. The current dividend yield of the company is 1.8%.
In the six years ended Dec 31, 2021, Essential Utilities expanded utility operations by completing many water and wastewater acquisitions, which, in turn, added 94,000 customers. In the first nine months of 2022, WTRG completed two acquisitions, which added 19,175 customers. Essential Utilities plans to invest $3 billion from 2022 through 2024 to fortify operations and efficiently serve the expanding customer base.
Essential Utilities’ long-term earnings growth is pegged at 6.2%. The current dividend yield of the company is 2.4%. The Zacks Consensus Estimate for WTRG's 2022 and 2023 earnings implies year-over-year growth of 6.6% and 6.5%, respectively.
Price Performance
Shares of AWK have gained 21.4% in the past three months compared with the industry’s 16.1% growth.
Image: Bigstock
American Water (AWK) Unit to Acquire Sewer Assets for $1M
American Water Works Company (AWK - Free Report) has announced that its subsidiary, Pennsylvania American Water, will acquire the Sadsbury Township Municipal Authority Sanitary Sewer Collection System for $990,000. The sewer collection system serves 250 properties.
The aging of crucial water and wastewater infrastructure is concerning for the water industry of the United States. After completing the acquisition, Pennsylvania American Water plans to invest $1.3 million in the first five years of ownership to improve the overall wastewater infrastructure of the acquired assets. The acquisition of wastewater assets will extend American Water Works’ high-quality services to its new customers.
Fragmented Industry Needs Consolidation
According to the Environmental Protection Agency, more than 50,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers at present. Due to a large number of small operators in the industry and a lack of adequate funds, at times, essential upgrades and repairs of infrastructure get delayed.
Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. The breaks in the pipeline result in the wastage of 6 billion gallons of potable water each day and add to the losses of water utility operators. Aging and a lack of timely maintenance are major contributors to pipeline breaks.
The acquisition of small units by larger utilities ensures necessary investments for the upgrade of infrastructure and the continuation of high-quality services to customers. American Water Works continues to widen its market footprint through strategic acquisitions.
Utilities Continue to Consolidate
Other water utilities like California Water Service Group (CWT - Free Report) , SJW Group (SJW - Free Report) and Essential Utilities (WTRG - Free Report) in the water utility space are expanding operations through systematic acquisitions.
California Water Service recently received approval to acquire the water system assets of Skylonda Mutual Water Company. The buyout is scheduled to close later this year, subject to customary closing conditions. Also, in June 2022, CWT announced that its unit, Texas Water Service, closed the acquisition of Railyard Utility’s wastewater system by collaborating with BVRT Utility Holding Company.
The Zacks Consensus Estimate for California Water Service's 2023 earnings suggests year-over-year growth of 21.7%. The current dividend yield of the company is 1.63%.
SJW Group completed more than 25 acquisitions in the 2010-2021 time frame and expanded operations. In January 2022, it closed the acquisition of Texas Country Water in Comal, TX. The deal added more than 1,900 water and wastewater customers to the existing customer base. This has been the fourth Texas acquisition by SJW Group in the past 12 months. In the next five years, the company plans to invest $1.5 billion to further strengthen its infrastructure.
The Zacks Consensus Estimate for SJW Group's 2022 and 2023 earnings implies year-over-year growth of 15.3% and 6.6%, respectively. The current dividend yield of the company is 1.8%.
In the six years ended Dec 31, 2021, Essential Utilities expanded utility operations by completing many water and wastewater acquisitions, which, in turn, added 94,000 customers. In the first nine months of 2022, WTRG completed two acquisitions, which added 19,175 customers. Essential Utilities plans to invest $3 billion from 2022 through 2024 to fortify operations and efficiently serve the expanding customer base.
Essential Utilities’ long-term earnings growth is pegged at 6.2%. The current dividend yield of the company is 2.4%. The Zacks Consensus Estimate for WTRG's 2022 and 2023 earnings implies year-over-year growth of 6.6% and 6.5%, respectively.
Price Performance
Shares of AWK have gained 21.4% in the past three months compared with the industry’s 16.1% growth.
Image Source: Zacks Investment Research
Zacks Rank
American Water Works currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.