American States Water: A Strong Buy

Zacks

On Jan 9, Zacks Investment Research upgraded American States Water Company (AWR) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Consistent performance from this water utility and strong third-quarter results sparked upward earnings estimate revisions.  Moreover, this utility delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 17.6%. The long-term expected earnings growth rate for this stock is 6.0%    

American States Water Company reported third-quarter earnings on Nov 5. Non-GAAP earnings per share of 97 cents per share surpassed the Zacks Consensus Estimate by 21.2% and outpaced the year-ago figure by 16.9%.

Impressive performance from its Water and Contracted Services segments helped total revenue to reach $133.5 million and beat the year ago results by 11.5%.

During the quarter the company successfully curtailed net interest expenses by 12.7% to $5.4 million from $6.1 million incurred in the year-ago period. The reduction in short-term borrowing and higher interest income led to the decline in net expenses.

Consistent dividend payments since 1931 make the shares attractive. An annual dividend of $1.42 per share results in a dividend yield of 2.9%, higher than the industry average of 1.86%.

The average capital expenditure program of $85 million per year for 2013 through 2015 will enable the company to complete water projects to meet consumer demand.

The Zacks Consensus Estimate for 2012 moved higher by 19.1% to $2.66 per share over the last 60 days, as all 5 estimates were raised. The Zacks Consensus Estimate for 2013 increased 1.98% to $2.71 per share over the same period, as all 7 estimates climbed up.

Other Stocks to Consider

Besides this company, a few other water utilities are also performing well and have a favorable Zacks Rank. The stocks worth considering are American Water Works Company Inc. (AWK) and Aqua America Inc. (WTR). Both currently have a short-term Zacks Rank #2 (Buy).
 

Read the Full Research Report on WTR

Read the Full Research Report on AWK

Read the Full Research Report on AWR

Zacks Investment Research



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