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Why Is American Water Works (AWK) Up 4.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for American Water Works (AWK - Free Report) . Shares have added about 4.9% in that time frame, outperforming the S&P 500.

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

American Water Works Q1 Earnings Miss, Revenues Beat

American Water Works Company posted first-quarter 2019 earnings per share of 61 cents, which lagged the Zacks Consensus Estimate by 3.2%.  However, the bottom line improved 3.4% year over year on the back of contribution generated from infrastructure investment, acquisitions and organic growth.

The company reported GAAP earnings of 62 cents compared with 59 cents in the year-ago quarter.

Total Revenues
 
Total revenues of $813 million beat the Zacks Consensus Estimate of $803 million by 1.2% and increased 6.8% from the year-ago figure of $761 million.

Highlights of the Release
 
Total operating expenses in the quarter were $575 million, up 5.7% from the year-ago period. The increase was primarily led by higher operation and maintenance expenses.

Operating income was $238 million, up 9.7% year over year.

Segment Details
 
Regulated businesses’net income was $107 million compared with $104 million in the year-ago quarter. Regulated businesses added 7,700 customers in first quarter through acquisitions and organic growth. The new rates and rising demand from expanding customer base boosted quarterly earnings from this segment.

Market-Based businesses’ net income was $20 million compared with $12 million in the year-ago quarter. The increase was primarily driven by Homeowner Services Group acquisition of Pivotal and customer additions under new partnerships.
 
Financial Highlights

Cash and cash equivalents were $63 million as of Mar 31, 2019, up 51.5% from $130 million on Dec 31, 2018.

Long-term debt was $7,568 million as of Mar 31, 2019, marginally lower than $7,576 million as of December 2018 end.

Guidance

American Water Works has affirmed 2019 earnings guidance in the range of $3.54-$3.64 per share.

It plans to invest $1.7-$1.8 billion in 2019 for capital expenditures and acquisitions.

The company expects long-term EPS compound annual growth rate in top half of 7-10% range, anchored off 2017 EPS.
 

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, American Water Works has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, American Water Works has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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