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Aqua America (WTR) Up 5.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Aqua America (WTR - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Aqua America due for a pullback? 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 catalysts.

Aqua America Q3 Earnings Beat, Revenues Lag Estimates

Aqua America Inc. reported third-quarter 2018 earnings per share of 44 cents, beating the Zacks Consensus Estimate of 43 cents by 2.33%. The figure also improved 2.33% from 43 cents in the year-ago quarter.

The year-over-year improvement can be attributed to favorable rates, consumption and regulated growth.

Total Revenues

During the quarter, revenues amounted to $226.1 million, which missed the Zacks Consensus Estimate of $232 million by 2.5%. Nevertheless, revenues were up 5.2% year over year. The upside can be attributed to rate activity, driven by additional revenues from infrastructure surcharge mechanisms and growth in the regulated customer base.

Highlights of the Release

Aqua America, to provide significant opportunities for infrastructure investment and growth, announced the acquisition of Peoples , a Pittsburgh-based natural gas utility with more than 740,000 customers.

The company completed the acquisition of Peotone, Illinois’ water and wastewater systems with nearly 3,000 customers. It signed two additional municipal acquisitions that added nearly 6,000 new customers for a total of nearly 33,000 new customers.

Operation and maintenance expenses increased 2.8% year over year to $68.6 million.

Interest expenses increased 13.4% to $25.4 million from $22.4 million in the year-ago quarter.

Financial Highlights

Current assets were $149.3 million as of Sep 30, 2018, up from $131.2 million on Dec 31, 2017.

Long-term debt was $2,226.5 million as of Sep 30, 2018, higher than $2,007.7 million on Dec 31, 2017.

Guidance

Aqua America narrowed the top range of its 2018 earnings guidance. Currently, the guidance range is $1.40-$1.42 per share, up from the previous range of $1.37-$1.42.

It expects customer base to expand 2-3% in 2018. The company plans to invest $500 million in 2018. This is part of the investment plan of nearly $1.4 billion through 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Aqua America has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Aqua America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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