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Aqua America Expands Via Organic & Inorganic Initiatives

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Aqua America Inc. continues to expand its operations through organic and inorganic ways. In 2018, this water and wastewater service provider added 13,600 new customers to the existing customer base of more than 3 million people through five completed municipal acquisitions. Aqua America has successfully integrated the acquired assets with its existing operations.

Acquisitions — A Must in Water Space
 
The U.S. water and wastewater service space in highly fragmented. Massive infrastructural investments are required to upgrade and maintain the water utilities, as old and soiled water pipelines are quickly nearing their effective service life. An Environment Protection Agency (EPA) report projects that capital investment of $682.4 billion will be needed to upgrade drinking water and wastewater projects.

It is quite difficult for small water utility operators to make large investment for replacing, as well as upgrading old and soiled assets. Therefore, consolidation is the need of the hour in the fragmented U.S. water utility space. Consolidation will enable big utilities to make the necessary infrastructure overhauls that have become imperative for the industry at large.  

Aqua America has been actively and systematically expanding its operations through acquisitions. The company has completed more than 380 acquisitions since 1995. In addition, its seven pending water and wastewater acquisitions under agreement, on completion during this year, will add another 20,000 customers to the existing customer base.

American Water Works Company (AWK - Free Report) is another water utility that is focused on strategic operations to expand business. The pending acquisitions, when closed, will increase its customer base in excess of 50,000 in 2019.

The immense growth opportunities in the water utility space are drawing attention from electric and gas service providers. Eversource Energy (ES - Free Report) has completed the acquisition of Aquarion Water and is looking for more opportunities to expand its operation in the water space.

Organic Investments

American Water Works aims to invest within $8-$8.6 billion from 2019 through 2023, which will support and boost its existing operations and water infrastructure. On the contrary, Aqua America has plans to invest more than $1.4 billion in the 2018-2020 time period to strengthen its existing assets.

These investments will help in the replacement of old water mains, and introduction of new technologies, which will assist in early detection of water leakage and avoid wastage.

Price Movement

In the past three months, shares of Aqua America have gained 1.1% compared with its industry's growth of 9.2%.



Zacks Rank & A Key Pick

Currently, Aqua America has a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is California Water Service Group (CWT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

California Water Service’s long-term earnings (three to five years) growth is pegged at 7%. The Zacks Consensus Estimate for 2019 earnings is $1.42, reflecting year-over-year growth of 16.12%.

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