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American Water (AWK) Arm to Invest $0.65M in Water Treatment

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American Water Works Company AWK announced that its subsidiary Illinois American Water is going to invest nearly $650,000 to improve the water services that it provides to customers in the Pontiac area. The investment will be directed to repair one of four water treatment tanks, rehabilitate six filters and install a new generator.

The work relating to strengthening of water infrastructure will start this month and will be completed this fall. Illinois American Water continues to make regular investments to strengthen its existing water and wastewater infrastructure. In 2018, the company invested more than $122 million in infrastructure upgrade.

Water Industry Needs Investment

The existing U.S. water and wastewater infrastructure is old and requires immediate attention. Per American Water Works, by 2020, nearly 44% of the existing U.S. pipe infrastructure can be classified as poor or very poor, with the service life of the pipelines likely to be over. As a result of its crumbling water infrastructure, more than 20% or 2 trillion gallons of treated water is lost in the United States each year.

Per an American Water Works Association report, the cost of restoring aging underground water pipelines in the United States will be at least $1 trillion in the next 25 years.

Ongoing investments to replace and upgrade the old water infrastructure will help reduce the loss of precious water. American Water aims to invest within $8-$8.6 billion from 2019 through 2023. The current investment of Illinois American Water is part of the company’s long-term investment plan.

Apart from American Water, water utilities like Aqua America Inc. WTR announced that it is going to invest more than $555 million in 2019 to strengthen its water and wastewater infrastructure. This will be part of the company’s investment target of more than $1.4 billion in the 2019-2021 time period.

Price Movement

Shares of American Water have outperformed the industry in a year’s time.

Zacks Rank and Key Picks

Currently, American Water has a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked water utilities in the same space are Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp (SBS - Free Report) and Middlesex Water Company MSEX, each sporting a Zacks Rank #1.
Sabesp reported average positive earnings surprise of 4.22% in the last four quarters. The Zacks Consensus Estimate for 2019 and 2020 has moved up 9.7% and 8.3%, respectively, in the past 60 days.

Middlesex Water reported average positive earnings surprise of 19.72% in the last four quarters. The Zacks Consensus Estimate for 2019 and 2020 has moved up 5.9% and 4.7%, respectively, in the past 60 days.

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