American Water Works Company (AWK - Free Report) announced that its subsidiary, Pennsylvania American Water, will invest $8.5 million in 2017 to rehabilitate 10 of its existing water storage tanks and erect four new storage structures.
The Pennsylvania American Water manages nearly 340 water storage facilities across the state and rehabilitates some of them each year. Last year, the company upgraded 11 water storage tanks for $5 million.
Project in Detail
The combined cost of the tank projects is nearly $8.5 million, including $5.9 million for rehab and repainting work. The tank rehabilitation program includes inspecting, sandblasting and repainting tanks, which is necessary to protect the water quality and extend the service life of the water storage facility.
The new water storage will help the company to meet increasing customer demand and improve fire protection in the region where it will be erected. Pennsylvania American Water provides water and wastewater services to nearly 2.3 million customers in the state.
The investment is part of the American Water Works’ planned capital expenditure of $1.5 billion in 2017.
Ongoing Maintenance Work
The company, along with its subsidiaries, continues to strengthen the existing infrastructure. On the other hand, it is also replacing old and damaged pipelines, upgrading water treatment plants and rehabilitating the water storage facilities with the help of its units.
Last week, American Water Works announced that its subsidiary, New Jersey American Water, will invest $65 million to protect its Raritan-Millstone Water Treatment Plant from flooding during extreme weather conditions in the region. (Read more: American Water Unit to Invest $65M in Infrastructure Upgrade)
Water Industry Needs Consistent Investment
The overall water infrastructure in the U.S. is quite old and almost at the end of its life. Some of the water mains are nearly a century old and require immediate replacement. Hence, all big operators in this fragmented water utility space are investing on a regular basis to upgrade and improve the quality of their existing infrastructure.
American Water Works aims to invest $6.7–$7.3 billion from 2017 through 2021. In the past couple of months, the company has been very active on expanding operations through acquisitions and upgrading its existing infrastructure. The company provides water and waste water services to nearly 15 million customers.
Aqua America Inc. (WTR - Free Report) , another utility, has plans to make capital investments of over $450 million in 2017 as part of an ambitious investment target of over $1.2 billion in the 2017–2019 period. Connecticut Water Service Inc. aims to invest more than $150 million in the 2017–2019 time frame to strengthen its existing infrastructure.
In the last six months, American Water Works’ shares returned 9.8%, outperforming the Zacks categorized Utility-Water Supply industry’s gain of 8.0%.
The utility is well poised to benefit from strategic acquisitions and regulated investments to strengthen existing infrastructure, which, in turn, is expanding customer base and providing a boost to the top line.
American Water Works currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company is a consistent performer and has surpassed Zacks Consensus Estimates in three out of the last four quarters, resulting in an average beat of 3.43%.
A better-ranked stock in the same space is Artesian Resources Corporation currently having a Zacks Rank #2 (Buy).
Artesian Resources Corporation’s 2017 Zacks Consensus Estimate moved up by 2.1% to $1.49 per share in the last 60 days.
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