The Zacks Utility - Water Supply industry includes companies that are involved in providing drinking water and wastewater services to industrial, commercial and residential customer classes, along with numerous military bases across the country.

A continuous and uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Water utilities across the United States are silently doing this critical task day in and day out to meet the increasing demand of millions of Americans.

Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water. The operators own more than 2 million miles of pipelines that are getting old.

The water and wastewater infrastructure is aging and is gradually nearing the end of its effective service life. Per the U.S. Environmental Protection Agency, an estimated $896 billion investment is necessary to maintain and expand drinking water and wastewater services to meet the demand over the next 20 years.

Given the current situation, investor-owned water utilities and the government are funding water and wastewater infrastructure projects to upgrade the infrastructure. The high-interest rate remains a concern as the water utilities sometimes need to borrow to fund their long-term capital projects.

In this article, we run a comparative analysis on two Utility – Water Supply companies — California Water Service Group (CWT Quick QuoteCWT - Free Report) and Primo Water Corporation — to decide which stock is a better pick for your portfolio now.

Both stocks currently carry a Zacks Rank #2 (Buy). Primo Water has a current market cap of $2.8 billion while California Water Service has a market cap of $2.7 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projections

The Zacks Consensus Estimate for Primo Water’s 2024 and 2025 earnings per share is pegged at 88 cents and $1.07, respectively, reflecting an increase of 17.3% and 48.6%, in the past 60 days.

The Zacks Consensus Estimate for California Water Services’ 2024 and 2025 earnings per share has remained unchanged at $2.25 and $2.37, respectively, in the past 60 days.

Return on Equity (ROE)

ROE is the measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for Primo Water and  California Water Service is 9.48% and 3.75%, respectively, compared with the industry’s ROE of 8.68%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield of Primo Water is 1.97% while the same for California Water Service is 2.46%, better than the Zacks S&P 500 Composite’s yield of 1.58%.

Price Performance

In the past three months, Primo Water’s shares have gained 15.2% against the industry's decline of 5.5%. Shares of California Water Service have lost 10.8% in the same time frame.

Image Source: Zacks Investment Research

Debt to Capital

Debt to capital is a vital indicator of a company’s financial position. It shows how much debt is used to run the business. Currently, California Water’s total debt to capital is 42.4%, better than the industry’s average of 47.62%. Primo Water’s debt to capital is 46.9%.

Outcome

Both companies efficiently provide water and wastewater services to customers. The companies are evenly matched in terms of market capitalization as well as some other parameters, and are good picks for your portfolio. But our choice at this moment is Primo Water, given its better earnings estimate revision and price performance in comparison with California Water Service Group.