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American States Water (AWR) to Gain From Strategic Investments
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American States Water Company’s (AWR - Free Report) regular investments in upgrades are strengthening its infrastructure. The company has a strong utility customer base, which is increasing the demand for its services.
However, this Zacks Rank #3 (Hold) company’s excessive reliance on a single state for a significant portion of its earnings acts as a headwind.
Tailwinds
American States Water’s strategic capital investments are making its infrastructure stronger and resilient. The regulated utilities invested $167.4 million in company-funded capital projects in 2022 and expect capital expenditures of $140-$160 million for 2023. These systematic investments drove the rate base from $752.2 million in 2018 to $1,152.3 million in 2022.
AWR has a sturdy utility customer base, and most importantly, it is increasing its electricity and water utility customer base at a slow but steady pace. The company's subsidiary, American States Utility Services (“ASUS”), has long-term contracts with military bases, which are 50-year firm fixed-price deals. The long-term defense pacts lend stability to the company’s earnings.
American States Water has been a steady dividend payer. It has paid dividends to shareholders every year since 1931 and increased the amount in each calendar year for the last 69 consecutive years. The consistent performance of the company helps it continue with its shareholder-friendly move.
Headwinds
The company still focuses on a single state, California, particularly Southern California, for its services. Consequently, the financial performance of AWR, to a large extent, is dependent on the political, water supply, labor, utility cost and regulatory risks, as well as economic conditions, natural disasters and other risk factors affecting the state.
GWRS’ long-term (three to five years) earnings growth rate is 15%. The Zacks Consensus Estimate for GWRS’ 2023 earnings per share (EPS) indicates a year-over-year increase of 12.5%.
The Zacks Consensus Estimate for CWT’s 2023 EPS implies growth of 7.9% year over year. The same for sales indicates a year-over-year improvement of 0.4%.
The Zacks Consensus Estimate for SJW’s 2023 EPS implies an improvement of 5% from that recorded in 2022. The company delivered an average earnings surprise of 20.1% in the last four quarters.
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American States Water (AWR) to Gain From Strategic Investments
American States Water Company’s (AWR - Free Report) regular investments in upgrades are strengthening its infrastructure. The company has a strong utility customer base, which is increasing the demand for its services.
However, this Zacks Rank #3 (Hold) company’s excessive reliance on a single state for a significant portion of its earnings acts as a headwind.
Tailwinds
American States Water’s strategic capital investments are making its infrastructure stronger and resilient. The regulated utilities invested $167.4 million in company-funded capital projects in 2022 and expect capital expenditures of $140-$160 million for 2023. These systematic investments drove the rate base from $752.2 million in 2018 to $1,152.3 million in 2022.
AWR has a sturdy utility customer base, and most importantly, it is increasing its electricity and water utility customer base at a slow but steady pace. The company's subsidiary, American States Utility Services (“ASUS”), has long-term contracts with military bases, which are 50-year firm fixed-price deals. The long-term defense pacts lend stability to the company’s earnings.
American States Water has been a steady dividend payer. It has paid dividends to shareholders every year since 1931 and increased the amount in each calendar year for the last 69 consecutive years. The consistent performance of the company helps it continue with its shareholder-friendly move.
Headwinds
The company still focuses on a single state, California, particularly Southern California, for its services. Consequently, the financial performance of AWR, to a large extent, is dependent on the political, water supply, labor, utility cost and regulatory risks, as well as economic conditions, natural disasters and other risk factors affecting the state.
Stocks to Consider
Some better-ranked stocks from the same industry are Global Water Resources, Inc. (GWRS - Free Report) , California Water Service Group (CWT - Free Report) and SJW Group (SJW - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GWRS’ long-term (three to five years) earnings growth rate is 15%. The Zacks Consensus Estimate for GWRS’ 2023 earnings per share (EPS) indicates a year-over-year increase of 12.5%.
The Zacks Consensus Estimate for CWT’s 2023 EPS implies growth of 7.9% year over year. The same for sales indicates a year-over-year improvement of 0.4%.
The Zacks Consensus Estimate for SJW’s 2023 EPS implies an improvement of 5% from that recorded in 2022. The company delivered an average earnings surprise of 20.1% in the last four quarters.