Global Water Resources, Inc. (GWRS - Free Report) has signed an agreement to acquire Red Rock Utilities, a provider of water and wastewater services in the Pinal and Pima counties of Arizona. Both these countries in Arizona have significant growth potential. During June, the company entered into an agreement to acquire a Class D water and wastewater utility in Arizona.
These acquisitions will expand Global Water Resources’ service area by 9 square miles and add nearly 1,654 connections to its existing customer base. The said acquisition is part of the company’s strategy to expand operation along with boost organic growth.
It entered into an agreement to acquire four utilities in the past 18 months, in a bid to augment organic growth. Global Water Resources is on track to achieve a double-digit customer growth rate in 2018.
Consolidation is Essential in Water Space
The overall water infrastructure is aging, and billions of dollars are needed to be invested for strengthening and upgrading the existing water infrastructure. It becomes very difficult for small operators or municipalities to make large investments for upgrading and expanding their water, and wastewater infrastructure.
However, it is easier for large companies to make arrangement for funds to carry out these major overhauls. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.
American Water Works (AWK - Free Report) is one of the most active players and continues to widen its market reach through acquisitions. In the first half of 2018, the company added 5,600 new customers through completed acquisitions.
Despite receiving acquisition offers from other companies, SJW Group (SJW - Free Report) and Connecticut Water Service, Inc. continue to work out a way to create a pure-play, and geographically diverse water utility.
Zacks Rank & A Key Pick
Global Water Resources currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Middlesex Water Company (MSEX - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here..
Middlesex Water Company delivered an average positive earnings surprise of 6.83% in the trailing four quarters. Earnings estimates of the company have been revised 17.9% upward to $1.84 in the past 60 days.
Shares of both Global Water Resources and Middlesex Water Company have outperformed the broader industry’s growth in the past three months.
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