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AWR or CWT: Which is a Better Utility Water Supply Stock?
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The Zacks Utility - Water Supply industry includes companies that provide drinking water and wastewater services to industrial, commercial and residential customers, along with numerous military bases across the country.
Healthy and hygienic living requires a constant, uninterrupted flow of clean potable water and reliable sewer services. Water utilities carry out the regular crucial work of meeting millions of Americans’ increasing demand for potable water. Storage tanks, treatment and desalination facilities are owned by utility operators to provide continuous potable water to all types of customers.
Water utility operators own nearly 2.2 million miles of pipelines that are getting old. Utilities continuously replace old pipelines and add new ones to expand operations. Per the U.S. Environmental Protection Agency, an estimated $896 billion investment is necessary to maintain and expand drinking water and wastewater services to meet the demand over the next 20 years.
Given the current situation, investor-owned water utilities and the government are funding water and wastewater infrastructure projects to upgrade the infrastructure. The Fed has not increased the benchmark rate since July 2023, but indicated the possibility of one rate cut in September 2024. The likely drop in interest rates in 2024 would be a positive for utility operators planning to make large investments in infrastructure upgrades.
In this article, we have run a comparative analysis on two Zacks Utility – Water Supply companies — American States Water (AWR - Free Report) and California Water Service Group (CWT - Free Report) — to decide which one is a better pick for your portfolio.
American States Water has a market capitalization of $3.03 billion, while California Water has $3.11 billion.
Growth Projections
The Zacks Consensus Estimate for AWR’s 2024 earnings is pinned at $3.03 per share on revenues of $577 million. This implies a year-over-year bottom-line increase of 6.3% and top-line decline of 3.1%.
The Zacks Consensus Estimate for CWT’s 2024 earnings is pegged at $3.25 per share on revenues of $986.76 million. This indicates year-over-year bottom and top-line growth of 257.1% and 24.2%, respectively.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for American States Water and California Water is 13.45% and 11.94%, respectively, compared with the industry’s 10.77%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, American States Water and California Water have a debt-to-capital of 52.88% and 45.61%, respectively, compared with the industry’s 48.91%.
The times interest earned (TIE) ratio for AWR is 3.9, and the same for CWT is 3.7. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for American States Water is 2.13% and that for California Water is 2.12% compared with the Zacks S&P 500 composite’s average of 1.31%.
Price Performance
In the past six months, shares of AWR and CWT have risen 8.7% and 15%, respectively. The industry grew 15.9% in the same time frame.
Image Source: Zacks Investment Research
Outcome
Both American States Water and California Water are evenly matched and good picks for your portfolio. Both companies are focused on providing water and wastewater services to customers. However, our choice at this moment is CWT, given its better growth projections, debt management and price performance than AWR.
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AWR or CWT: Which is a Better Utility Water Supply Stock?
The Zacks Utility - Water Supply industry includes companies that provide drinking water and wastewater services to industrial, commercial and residential customers, along with numerous military bases across the country.
Healthy and hygienic living requires a constant, uninterrupted flow of clean potable water and reliable sewer services. Water utilities carry out the regular crucial work of meeting millions of Americans’ increasing demand for potable water. Storage tanks, treatment and desalination facilities are owned by utility operators to provide continuous potable water to all types of customers.
Water utility operators own nearly 2.2 million miles of pipelines that are getting old. Utilities continuously replace old pipelines and add new ones to expand operations. Per the U.S. Environmental Protection Agency, an estimated $896 billion investment is necessary to maintain and expand drinking water and wastewater services to meet the demand over the next 20 years.
Given the current situation, investor-owned water utilities and the government are funding water and wastewater infrastructure projects to upgrade the infrastructure. The Fed has not increased the benchmark rate since July 2023, but indicated the possibility of one rate cut in September 2024. The likely drop in interest rates in 2024 would be a positive for utility operators planning to make large investments in infrastructure upgrades.
In this article, we have run a comparative analysis on two Zacks Utility – Water Supply companies — American States Water (AWR - Free Report) and California Water Service Group (CWT - Free Report) — to decide which one is a better pick for your portfolio.
Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American States Water has a market capitalization of $3.03 billion, while California Water has $3.11 billion.
Growth Projections
The Zacks Consensus Estimate for AWR’s 2024 earnings is pinned at $3.03 per share on revenues of $577 million. This implies a year-over-year bottom-line increase of 6.3% and top-line decline of 3.1%.
The Zacks Consensus Estimate for CWT’s 2024 earnings is pegged at $3.25 per share on revenues of $986.76 million. This indicates year-over-year bottom and top-line growth of 257.1% and 24.2%, respectively.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for American States Water and California Water is 13.45% and 11.94%, respectively, compared with the industry’s 10.77%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, American States Water and California Water have a debt-to-capital of 52.88% and 45.61%, respectively, compared with the industry’s 48.91%.
The times interest earned (TIE) ratio for AWR is 3.9, and the same for CWT is 3.7. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for American States Water is 2.13% and that for California Water is 2.12% compared with the Zacks S&P 500 composite’s average of 1.31%.
Price Performance
In the past six months, shares of AWR and CWT have risen 8.7% and 15%, respectively. The industry grew 15.9% in the same time frame.
Image Source: Zacks Investment Research
Outcome
Both American States Water and California Water are evenly matched and good picks for your portfolio. Both companies are focused on providing water and wastewater services to customers. However, our choice at this moment is CWT, given its better growth projections, debt management and price performance than AWR.