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American Water Unit to Invest $2.7M for Replacing Old Mains

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American Water Works Company (AWK - Free Report) announced that its subsidiary, New Jersey American Water will invest $2.7 million in 2017 to replace aging water mains in its Ocean City service area.

The company aims to replace 10,810 feet of old mains to increase service reliability, water flow for residential consumption and fire protection.

Maintenance Work
American Water Works, along with its subsidiaries, continues to strengthen the existing infrastructure. 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 month, one of the company’s subsidiaries, Illinois American Water announced it will invest $5.7 million in 2017 to replace aging water mains and install 11 pressure-reducing valves in the system’s high service zone in Peoria. (Read more: American Water Unit to Invest $5.7M for Better Distribution)

U.S. Water Infrastructure is Aging
The U.S. water infrastructure in pretty old and massive investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.

American Water Works aims to invest $6.7-$7.3 billion from 2017 through 2021, which will help it boost earnings by 7-10% per year in the aforesaid period from the 2015 base. In the first half of 2017, the company invested $618 million, a majority chunk of which was invested to strengthen operation of its regulated business.

Aqua America Inc. (WTR - Free Report) , another utility, has plans to make capital investments of more than $450 million in 2017 as part of an ambitious investment target of more than $1.2 billion in the 2017-2019 period. Connecticut Water Service Inc. aims to invest more than $150 million in the 2017-2019 period to strengthen its existing infrastructure.

Price Movement

Year to date, American Water Works’ stock has gained 11.7%, outperforming the 11.1% rally of the industry.

The company is well poised to benefit from strategic acquisitions and regulated investments to strengthen the existing infrastructure, which, in turn, is expanding customer base and providing a boost to its top line.

Zacks Rank

American Water Works currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stock to Consider

A better-ranked stock in the same space is SJW Corporation (SJW - Free Report) currently sporting a Zacks Rank #1.

SJW Corporation reported positive earnings surprises in three out of last four quarters with an average surprise of 23.9%. The Zacks Consensus Estimate for earnings is $2.47 on revenues of $361 million for 2017. The bottom line reflects a 2.5% year-over-year rise and the top-line projection is 6.3% higher.

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