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Why Is Consolidated Water (CWCO) Up 7.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Consolidated Water (CWCO - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Consolidated Water due for a pullback? 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 catalysts.

Consolidated Water Q1 Earnings & Sales Beat Estimates

Consolidated Water Co. Ltd. posted first-quarter 2023 earnings per share (EPS) of 26 cents, which surpassed the Zacks Consensus Estimate of 20 cents by 30%. The bottom line increased 73.3% from the previous year’s 15 cents.

Total Revenues

Consolidated Water reported first-quarter revenues of $32.9 million, up 68% year over year. The figure surpassed the Zacks Consensus Estimate of $28.25 million by 16.5%.

Segment Details

Retail revenues for the first quarter were $7.8 million, an increase of 23% from $6.3 million in the year-ago quarter. This increase was due to a 20% rise in the volume of water sold in Grand Cayman. It included direct water sales to the water authority and increased tourist activity in the region.

Bulk revenues were $9.0 million, up 22% from $7.3 million in the year-ago quarter. The rise was due to an increase in CW-Bahamas’ energy costs, which improved the energy pass-through component of CW-Bahamas’ rates. Also, the volume of water sold increased 9%.

Manufacturing revenues for the first quarter of 2023 were $3.4 million, an increase of 183% from $1.2 million in the year-ago quarter. This increase was due to a rise in production activity and relief in the supply chain constraints.  

Services revenues were $12.7 million, up 170.2% from $4.7 million in the year-ago quarter. The improvement was due to an increase in plant design, construction revenues, and operating and maintenance revenues. Majority of this increase was the contribution of the subsidiary - PERC Water.

Highlights of the release

General and administrative expenses increased to $6 million due to rising pay, new hiring and higher accruals of bonus. The company continues to expand its operations. In January 2023, it became the 100% owner of PERC Water by acquiring the remaining 39% interest.

Net income from continuing operations was $4.1 million, 75% higher than the year-ago figure.

Financial Highlights

Cash and cash equivalents amounted to $51.1 million as of Mar 31, 2023, up from $50.7 million on Dec 31, 2022, and working capital was $70.6 million. Total long-term debt was $0.19 million as of Mar 31, 2023, lower than $0.22 million at 2022-end.

CWCO paid quarterly cash dividends of 8.5 cents per share and a total dividend of $1.4 million. Cash flow from operating activities in first-quarter 2023 was $3.8 million compared with $4.6 million in the year-ago period. Capital expenditure for the quarter was $12 million.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Consolidated Water has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Consolidated Water has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Consolidated Water is part of the Zacks Utility - Water Supply industry. Over the past month, Essential Utilities (WTRG - Free Report) , a stock from the same industry, has gained 0.7%. The company reported its results for the quarter ended March 2023 more than a month ago.

Essential Utilities reported revenues of $726.45 million in the last reported quarter, representing a year-over-year change of +3.9%. EPS of $0.72 for the same period compares with $0.76 a year ago.

Essential Utilities is expected to post earnings of $0.34 per share for the current quarter, representing a year-over-year change of +9.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Essential Utilities. Also, the stock has a VGM Score of C.


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