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American Water Works (AWK) Down 2.34% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for American Water Works (AWK - Free Report) . Shares have lost about 2.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is AWK due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

American Water Works Q1 Earnings Beat, Sales Down Y/Y

American Water Works Company posted first-quarter 2018 earnings per share of 59 cents, which beat the Zacks Consensus Estimate of 55 cents by 7.3%. Earnings improved 13.5% from the year-ago quarter.

The improvement came on the back of growth in Regulated Businesses as well as The Market-Based Businesses.

Total Revenues
 
Total revenues of $761 million missed the Zacks Consensus Estimate of $787 million by 3.3%. However, reported revenues improved 0.7% year over year.

Highlights of the Release
 
Total operating expenses in the quarter were $544 million, up 3.4% from the year-ago quarter. The increase was primarily led by higher operation & maintenance and higher depreciation & amortization expenses compared with the year-ago quarter.

Operating income was $217 million, down 5.7% year over year.
 
Segment Details
 
Regulated Businesses’ net income was $104 million, up 10.6% from $94 million in the year-ago quarter.

Market-Based Businesses’ net income was $12 million compared with $7 million in the year-ago quarter. The year-over-year increase can be attributed to growth in the Homeowner Services Group through customer addition and cost management and the federal income tax rate cut.

Financial Highlights
 
Cash and cash equivalents were $55 million as of Mar 31, 2018, in line with the Dec 31, 2017 level.
 
Long-term debt was $11,854 million as of Mar 31, 2018, lower than $11,883 million as of Dec 31, 2017.

The company made capital investments of $343 million in the first quarter, including $302 million to improve Regulated Businesses infrastructure to provide safe, clean and reliable service and more than $8 million for regulated acquisitions.

Guidance
 
American Water Works reaffirmed the 2018 earnings per share guidance at the range of $3.22-$3.32.

The company announced a hike in dividend payment of 9.6% to 45.5 cents per share. The dividend is payable on Jun 1, 2018, to shareholders of record as of May 11.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

American Water Works Price and Consensus

 

American Water Works Price and Consensus | American Water Works Quote

VGM Scores

At this time, AWK has a subpar Growth Score of D and a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, AWK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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