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American States Water (AWR) to Benefit From Ongoing 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 #2 (Buy) company’s excessive reliance on a single state for a significant portion of its earnings acts as a headwind.
Tailwinds
American States Water 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. Strategic capital investments are making the company’s infrastructure stronger and resilient. The regulated utilities invested $175.7 million in company-funded capital projects in 2023 and expect capital expenditures of $611.4 million during 2025-2027.
The company's subsidiary, American States Utility Services, 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. For 2024, this subsidiary is expected to contribute 50-54 cents per share to total earnings.
American States Water has been a steady dividend payer. The company has paid dividends to shareholders every year since 1931 and has 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.
The aging water infrastructure in some areas of California is a concern for the company. The unplanned outages of the system and pump maintenance expenses could increase unexpectedly and impact the profitability of the company.
Price Performance
In the past month, shares of American States Water have lost 1% against the industry’s 0.7% growth.
AWK’s long-term (three to five years) earnings growth rate is 7.76%. The Zacks Consensus Estimate for AWK’s 2024 earnings per share (EPS) indicates a year-over-year increase of 6.1%.
The Zacks Consensus Estimate for CWT’s 2024 EPS implies growth of 147.3% year over year. The same for sales indicates a year-over-year improvement of 11.3%.
CWCO’s long-term earnings growth rate is 8%. The company delivered an average earnings surprise of 61.6% in the last four quarters.
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American States Water (AWR) to Benefit From Ongoing 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 #2 (Buy) company’s excessive reliance on a single state for a significant portion of its earnings acts as a headwind.
Tailwinds
American States Water 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. Strategic capital investments are making the company’s infrastructure stronger and resilient. The regulated utilities invested $175.7 million in company-funded capital projects in 2023 and expect capital expenditures of $611.4 million during 2025-2027.
The company's subsidiary, American States Utility Services, 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. For 2024, this subsidiary is expected to contribute 50-54 cents per share to total earnings.
American States Water has been a steady dividend payer. The company has paid dividends to shareholders every year since 1931 and has 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.
The aging water infrastructure in some areas of California is a concern for the company. The unplanned outages of the system and pump maintenance expenses could increase unexpectedly and impact the profitability of the company.
Price Performance
In the past month, shares of American States Water have lost 1% against the industry’s 0.7% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the same industry are American Water Works (AWK - Free Report) , California Water Service Group (CWT - Free Report) and Consolidated Water (CWCO - Free Report) , each presently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AWK’s long-term (three to five years) earnings growth rate is 7.76%. The Zacks Consensus Estimate for AWK’s 2024 earnings per share (EPS) indicates a year-over-year increase of 6.1%.
The Zacks Consensus Estimate for CWT’s 2024 EPS implies growth of 147.3% year over year. The same for sales indicates a year-over-year improvement of 11.3%.
CWCO’s long-term earnings growth rate is 8%. The company delivered an average earnings surprise of 61.6% in the last four quarters.