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Why You Should Still Hold onto Aqua America (WTR) Stock

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Aqua America Inc. , the water and wastewater service provider, will benefit from an extensive network of water and wastewater systems, continuous investments in regulated assets and strategic acquisitions. However, water contamination, compliance with stricter regulation and fluctuating weather conditions are headwinds for the stock.

This Zacks Rank #3 (Hold) company expects its customer base to expand 1.5%–2% in 2017, driven by acquisitions and organic initiatives. Last year, Aqua America expanded its customer base by 14,399 or 1.6%. The company has yielded positive earnings surprise in three out of the last four quarters, with an average positive earnings surprise of 1.31%.

Aqua America has an extensive network of water treatment, pumping and distribution facilities, and water supply sources, helping it serve customers efficiently during normal conditions. The company’s water supplies are primarily self-supplied and processed at 21 surface water treatment plants located in four states, and numerous well stations located in all the states it operates in.

Water utilities always run the risk of contamination of water supplied to its customers despite implementing the best safety measures.Contamination could result in disruption of water services and lead to extra cost for quality testing and monitoring, treatment of source, or the purchase of alternative supplies.

Aqua America, Inc. Price and EPS Surprise

 

Aqua America, Inc. Price and EPS Surprise | Aqua America, Inc. Quote

These utilities are subject to certain federal and state environmental laws and regulations. With environmental regulations getting stricter by the day, compliance could lead to significantly higher operating costs for the company.

Aqua America aims to make capital investments of over $450 million in 2017, part of an ambitious investment target of over $1.2 billion in the 2017–2019 time period. Notably, other utilities like American Water Works (AWK - Free Report) plan to make capital investment of $1.5 billion in 2017 and invest $6.7–$7.3 billion from 2017 through 2021.

Stocks to Consider

Some better-ranked operators in the Utility -Water Supply industry are Artesian Resources Corporation (ARTNA - Free Report) and SJW Corporation (SJW - Free Report) .

Artesian Resources Corporation currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for 2017 moved up 6.4% to $1.49 per share in the last 60 days.

SJW Corporation carries a Zacks Rank #2 (Buy) and reported a positive earnings surprise in three out of last four earnings, with an average positive surprise of 36.17%. The Zacks Consensus Estimate for 2017 moved up 3.9% to $2.15 per share in the last 60 days.

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