American Water Works Hits 52-Week High

Zacks

On Apr 8, 2013, shares of American Water Works Company Inc. (AWK) hit a 52-week high of $41.85. American Water Works registered positive earnings surprises in three of the last four quarters of 2012, with an average beat of 7.21%.

In 2012, the company reported strong results, with full year earnings of $2.11 per share 21.9% higher than the 2011 level of $1.73. For the full year, revenue of $2.87 billion surpassed the year-ago figure of $2.67 billion by 7.5%.

The long-term earnings growth goal of the company is in the range of 7%–10%. American Water Works Company strives to achieve its goal through regulated investments, strategic acquisitions, new service offering and improvement in services. The company’s 2013 capital investment plan of $950 million reflects a 2.3% increase from the prior-year level.

American Water Works Company expects 2013 earnings per share in the range of $2.15 to $2.25, comfortably surpassing the 2012 level. The initiatives undertaken by the company to improve its operation and maintenance efficiency ratio will definitely benefit the company to achieve its target.

We expect 8% earnings growth on the back of a 5.18% top-line increase. The Zacks Consensus Estimate for first quarter 2013 is 36 cents reflecting year-over-year growth of 24.1%.

The present valuation also makes the company attractive. Shares of American Water Works Company currently trade at 18.82x 12-month forward earnings, a 6.7% discount to the peer group average of 20.17x. Its price-to-book ratio of 1.66 is at a 6.7% discount to the peer group average of 1.78.

The company has consistently paid dividends to its shareholders and increased shareholder worth. The strong financial performance also allowed its board of directors to increase the quarterly dividend rate. The present annual dividend rate of $1.00 per reflects a dividend yield of 2.41%, which is higher than the industry average of 1.99%

American Water Works currently carries a Zacks Rank #2 (Buy). We also prefer other water utilities like Aqua America Inc. (WTR), Companhia de Saneamento Básico do Estado de São Paulo (SBS) and American States Water Company (AWR). While Aqua America and SBS currently carry a Zacks Rank #1 (Strong Buy), American States Water Company retains a Zacks Rank #2 ( Buy).

Voorhees, N.J.-based American Water Works Company was founded in 1886. This is the largest publicly traded regulated water and wastewater utility holding company in the U.S., catering to approximately 14 million residents across the country and parts of Canada.
 

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