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Reasons to Add American Water Works Stock to Your Portfolio Now
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American Water Works Company, Inc.’s (AWK - Free Report) strategic capital investments to strengthen infrastructure and improve reliability are likely to boost its performance. Given its growth opportunities, rising earnings estimates make AWK a solid investment option in the utility sector.
The company currently carries a Zacks Rank #2 (Buy). Let’s look at the factors that are driving the stock.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2024 and 2025 earnings per share (EPS) has increased 0.6% and 0.2%, respectively, in the past 60 days.
The consensus estimate for 2024 and 2025 sales is pegged at $4.42 billion and $4.55 billion, respectively. The figures reflect year-over-year growth of 4.3% and 3.1% in 2024 and 2025, respectively.
AWK’s long-term (three to five years) earnings growth rate is 8%. It delivered an average earnings surprise of 1.1% in the trailing four quarters.
AWK Stock’s Debt Lower Than Its Sector
Currently, AWK’s total debt to capital is 56.4%, better than the sector’s average of 57.9%.
The company’s time-to-interest earned ratio at the end of the second quarter was 3.5. The ratio, being greater than one, reflects its ability to meet future interest obligations without difficulties. The decline in interest rates may lower the capital servicing expenses of AWK.
AWK's Expansion Through Acquisitions and Organic Ways
The U.S. water and wastewater industry is highly fragmented and American Water , in the first half of 2024, completed five acquisitions, which added 33,400 new customers to its customer base. American Water’s pending 22 acquisitions (as of June 30, 2024), when completed, should add another 59,000 customers. Acquisitions allow AWK to get fresh demand for its services and expand the company’s revenue stream.
AWK’s organic operation with miles of pipelines, water treatment plants, wastewater treatment plants and 3.5 million customers spread across various states continues to contribute to its earnings.
American Water’s Planned Long-term Investments
The company has been investing regularly to upgrade, expand and maintain its vast water and wastewater infrastructure. In the first half of 2024, AWK invested $1.4 billion in upgrades and acquisitions. It plans to invest $3.1 billion through the year to strengthen and expand its water and wastewater infrastructure.
American Water aims to invest $16-$17 billion in the 2024-2028 period and $34-$38 billion during 2024-2033. Nearly 69% of the planned expenditure in 2024-2033 will be directed toward strengthening the infrastructure.
Dividend Yield of AWK
AWK distributes dividends to its shareholders on a regular basis. The company’s current dividend yield is 2.09%, better than the Zacks S&P 500 composite’s average of 1.5%. AWK expects its dividend per share to increase in the range of 7-9% in the long term, subject to approval from the company’s board of directors.
Share Performance in Past Six Months
Shares of AWK have gained 23.2% in the past six months compared with the industry’s 17% growth.
American States Water delivered an average earnings surprise of 3.4% in the trailing four quarters. The Zacks Consensus Estimate for 2024 earnings has increased 0.7% in the past 60 days.
SJW Group delivered an average earnings surprise of 9.3% in the past four quarters. The consensus estimate for 2024 earnings is pegged at $2.76 per share, which indicates year-over-year growth of 2.6%.
Primo Water delivered an average earnings surprise of 7.2% in the trailing four quarters. The Zacks Consensus Estimate for 2024 EPS has increased 4.3% in the past 60 days.
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Reasons to Add American Water Works Stock to Your Portfolio Now
American Water Works Company, Inc.’s (AWK - Free Report) strategic capital investments to strengthen infrastructure and improve reliability are likely to boost its performance. Given its growth opportunities, rising earnings estimates make AWK a solid investment option in the utility sector.
The company currently carries a Zacks Rank #2 (Buy). Let’s look at the factors that are driving the stock.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2024 and 2025 earnings per share (EPS) has increased 0.6% and 0.2%, respectively, in the past 60 days.
The consensus estimate for 2024 and 2025 sales is pegged at $4.42 billion and $4.55 billion, respectively. The figures reflect year-over-year growth of 4.3% and 3.1% in 2024 and 2025, respectively.
AWK’s long-term (three to five years) earnings growth rate is 8%. It delivered an average earnings surprise of 1.1% in the trailing four quarters.
AWK Stock’s Debt Lower Than Its Sector
Currently, AWK’s total debt to capital is 56.4%, better than the sector’s average of 57.9%.
The company’s time-to-interest earned ratio at the end of the second quarter was 3.5. The ratio, being greater than one, reflects its ability to meet future interest obligations without difficulties. The decline in interest rates may lower the capital servicing expenses of AWK.
AWK's Expansion Through Acquisitions and Organic Ways
The U.S. water and wastewater industry is highly fragmented and American Water , in the first half of 2024, completed five acquisitions, which added 33,400 new customers to its customer base. American Water’s pending 22 acquisitions (as of June 30, 2024), when completed, should add another 59,000 customers. Acquisitions allow AWK to get fresh demand for its services and expand the company’s revenue stream.
AWK’s organic operation with miles of pipelines, water treatment plants, wastewater treatment plants and 3.5 million customers spread across various states continues to contribute to its earnings.
American Water’s Planned Long-term Investments
The company has been investing regularly to upgrade, expand and maintain its vast water and wastewater infrastructure. In the first half of 2024, AWK invested $1.4 billion in upgrades and acquisitions. It plans to invest $3.1 billion through the year to strengthen and expand its water and wastewater infrastructure.
American Water aims to invest $16-$17 billion in the 2024-2028 period and $34-$38 billion during 2024-2033. Nearly 69% of the planned expenditure in 2024-2033 will be directed toward strengthening the infrastructure.
Dividend Yield of AWK
AWK distributes dividends to its shareholders on a regular basis. The company’s current dividend yield is 2.09%, better than the Zacks S&P 500 composite’s average of 1.5%. AWK expects its dividend per share to increase in the range of 7-9% in the long term, subject to approval from the company’s board of directors.
Share Performance in Past Six Months
Shares of AWK have gained 23.2% in the past six months compared with the industry’s 17% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks in the industry are American States Water Company (AWR - Free Report) , SJW Group (SJW - Free Report) and Primo Water (PRMW - Free Report) , each currently carrying a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
American States Water delivered an average earnings surprise of 3.4% in the trailing four quarters. The Zacks Consensus Estimate for 2024 earnings has increased 0.7% in the past 60 days.
SJW Group delivered an average earnings surprise of 9.3% in the past four quarters. The consensus estimate for 2024 earnings is pegged at $2.76 per share, which indicates year-over-year growth of 2.6%.
Primo Water delivered an average earnings surprise of 7.2% in the trailing four quarters. The Zacks Consensus Estimate for 2024 EPS has increased 4.3% in the past 60 days.