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Should You Buy American Water (AWK) Ahead of Q1 Earnings?
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American Water Works (AWK - Free Report) is set to report first-quarter 2024 earnings on May 1, after market close. The Zacks Consensus Estimate for earnings is pegged at 99 cents per share on revenues of $0.95 billion. The top-line and bottom-line estimates suggest a decline of 1.3% and 8.8%, respectively, from a year ago.
Per our proven model, stocks with a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increase the chance of an earnings beat. This is exactly the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Price Performance
In the past month, shares of American Water have risen 0.4% against the industry’s and the S&P 500's decline of 0.8% and 2.2%, respectively.
Image Source: Zacks Investment Research
Factors Acting in Favor
American Water has been efficiently serving more than 14 million customers in 24 states. It has been investing regularly to upgrade, expand and maintain its vast water and wastewater infrastructure. The company plans to invest $3.1 billion in 2024 to strengthen and expand its water and wastewater infrastructure, with a major portion utilized for infrastructure improvements in Regulated Businesses. Over the long term, it aims to invest in the range of $16-$17 billion in 2024-2028 and $34-$38 billion in 2024-2033.
AWK generates nearly 100% of its net income from regulated operations. Its focus on expanding regulated operations through capital investments is yielding stable returns, which has allowed the company to increase shareholders’ value.
The ongoing expansion of the rate base will have a positive impact on its earnings over the long term. The company expects to witness a rate-base CAGR of 8-9% for 2024-2033. Implementation of new water and wastewater rates continues to boost performance.
Apart from serving the civilian customers, AWK provides efficient water and wastewater services to 18 Military installations across the United States. These stable defense contracts will continue to contribute over the long term and boost earnings. It has the opportunity and capability to clinch more defense contracts from the additional 70 military installation opportunities.
American Water is proving high-quality services and also working on cost management to make water utility bills affordable for its customers. These features are assisting it to expand its operations organically and attract more customers toward its services.
The water and waste industry is highly fragmented. Consolidation of the industry is the need of the hour. American Water, along with other investor-owned water utilities like California Water Service Group (CWT - Free Report) , The York Water Company (YORW - Free Report) and Essential Utilities (WTRG - Free Report) , are making systematic acquisitions to expand their operations and quality services to a larger group of customers. The systematic acquisitions extend service areas, adds new customers to the existing base and boost top-line growth of the company.
Headwinds
American Water also needs to borrow to fund its ongoing capital projects. Although interest rate hike has been stopped for the time being but the still-high interest rates will undoubtedly increase capital servicing costs.
Bottomline
Despite some headwinds, it is advisable to accumulate this stock for the long term, given its positive fundamentals. This company continues to expand its operations through inorganic and inorganic methods. American Water also has enough financial capabilities to meet its debt obligations. It rewards shareholders with quarterly dividend payments.
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Should You Buy American Water (AWK) Ahead of Q1 Earnings?
American Water Works (AWK - Free Report) is set to report first-quarter 2024 earnings on May 1, after market close. The Zacks Consensus Estimate for earnings is pegged at 99 cents per share on revenues of $0.95 billion. The top-line and bottom-line estimates suggest a decline of 1.3% and 8.8%, respectively, from a year ago.
Per our proven model, stocks with a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increase the chance of an earnings beat. This is exactly the case here.
At present, American Water has an Earnings ESP of +0.34% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Price Performance
In the past month, shares of American Water have risen 0.4% against the industry’s and the S&P 500's decline of 0.8% and 2.2%, respectively.
Image Source: Zacks Investment Research
Factors Acting in Favor
American Water has been efficiently serving more than 14 million customers in 24 states. It has been investing regularly to upgrade, expand and maintain its vast water and wastewater infrastructure. The company plans to invest $3.1 billion in 2024 to strengthen and expand its water and wastewater infrastructure, with a major portion utilized for infrastructure improvements in Regulated Businesses. Over the long term, it aims to invest in the range of $16-$17 billion in 2024-2028 and $34-$38 billion in 2024-2033.
AWK generates nearly 100% of its net income from regulated operations. Its focus on expanding regulated operations through capital investments is yielding stable returns, which has allowed the company to increase shareholders’ value.
The ongoing expansion of the rate base will have a positive impact on its earnings over the long term. The company expects to witness a rate-base CAGR of 8-9% for 2024-2033. Implementation of new water and wastewater rates continues to boost performance.
Apart from serving the civilian customers, AWK provides efficient water and wastewater services to 18 Military installations across the United States. These stable defense contracts will continue to contribute over the long term and boost earnings. It has the opportunity and capability to clinch more defense contracts from the additional 70 military installation opportunities.
American Water is proving high-quality services and also working on cost management to make water utility bills affordable for its customers. These features are assisting it to expand its operations organically and attract more customers toward its services.
The water and waste industry is highly fragmented. Consolidation of the industry is the need of the hour. American Water, along with other investor-owned water utilities like California Water Service Group (CWT - Free Report) , The York Water Company (YORW - Free Report) and Essential Utilities (WTRG - Free Report) , are making systematic acquisitions to expand their operations and quality services to a larger group of customers. The systematic acquisitions extend service areas, adds new customers to the existing base and boost top-line growth of the company.
Headwinds
American Water also needs to borrow to fund its ongoing capital projects. Although interest rate hike has been stopped for the time being but the still-high interest rates will undoubtedly increase capital servicing costs.
Bottomline
Despite some headwinds, it is advisable to accumulate this stock for the long term, given its positive fundamentals. This company continues to expand its operations through inorganic and inorganic methods. American Water also has enough financial capabilities to meet its debt obligations. It rewards shareholders with quarterly dividend payments.