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American Water's Subsidiary Buys Waimea Wastewater System

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American Water Works Company (AWK - Free Report) announced that its subsidiary, Hawaii American Water has completed the acquisition of Waimea Wastewater Company. This acquisition will add 217 residential and commercial wastewater customers to the existing customer base in Hawaii.

Hawaii American Water provides reliable wastewater services to more than 10,000 residential and commercial customers in Hawaii. Through this acquisition, American Water Works’ unit will extend high-quality services to new customers.

American Water Works has been very active in acquiring small water and wastewater service providers, as well as expanding operations. As of Jun 3, 2020, the company completed nine acquisitions, which added 9,269 customers to the existing customer base. The remaining 22 acquisitions as of Jun 3, 2020, when completed, will add more than 42,700 customers.

Why Consolidation is Important in Water Space?

Billions of gallons of potable water are lost in the United States every year due to thousands of pipeline breaks across the country on a daily basis, the primary reason being delay in replacing the old and soiled water and wastewater pipelines.

The role of consolidation is vital as it becomes extremely difficult for small service providers to invest a large sum to upgrade and repair old water mains. As it is, 50,000 water and 15,000 wastewater operators are currently providing services in the United States.

Hence, large water utilities are actively acquiring small water and wastewater service units, and ensuring investments to upgrade the quality of services. American Water Works is quite active in acquiring small service providers. Global Water Resources, Inc. (GWRS - Free Report) is also taking the inorganic route to expand operations in the United States. Another water utility, Essential Utilities (WTRG - Free Report) not only expanded water and wastewater operations through acquisitions but also ventured into the natural gas distribution business through the acquisition of Peoples.

Price Performance

Shares of American Water have outperformed the industry in the past 12 months.



Zacks Rank and Key Pick

Currently, the company has a Zacks Rank # 3 (Hold). A better-ranked water utility is American States Water Company (AWR - Free Report) , which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American States Water delivered average positive earnings surprise of 6.5% in the last four quarters. The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 1.8% and 2.5%, respectively, in the past 90 days.

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