Weather Spoils AWK Q2 Earnings

Zacks

Water utility American Water Works Company Inc. (AWK) reported second quarter earnings per share of 57 cents, lagging the Zacks Consensus Estimate of 60 cents by 5%.

Earnings were also 13.6% lower than the year-ago figure of 66 cents. The decline in earnings was attributable to above-average rainfall and cooler temperatures in its service territories, resulting in lower consumer demand.

Total Revenue

Second quarter total revenue of $724.2 million declined 2.9% year over year from $745.6 million and also lagged the Zacks Consensus Estimate of $762.0 million by 4.96%.  

The contribution from the company’s regulated business declined by 3% from the comparable year-ago period, primarily due to lackluster demand.  

Highlights of the Release

Total operating expenses in the reported quarter increased 1.6% to $482.4 million, primarily due to a 9.8% increase in depreciation and amortization expenses.

Interest expenses decreased 2.5% to $77.6 million from $79.6 million in the year-ago quarter due to a decline in debt.

Long-term debt of the company as of Jun 30, 2013 was $5.19 billion, marginally lower than $5.20 billion as of Dec 31, 2012.

During the quarter, the company announced the intended acquisition of Dale Service Corp., a wastewater utility company in Virginia and another company in Beaver County, Pa. Both these acquisitions are expected to close before the end of the year. It will expand market reach and add to the customer base.

Guidance

American Water Works reaffirmed its 2013 earnings per share guidance in the range of $2.15 to $2.25 per share.

American Water Works has already made capital investment of $429.8 million in the first half of 2013 and intends to invest $950 million in 2013 in various projects to ensure the safety and reliability of its water operations.

Other Company Releases

Aqua America, Inc. (WTR) announced second-quarter 2013 operating earnings of 38 cents per share, 5.5% above the Zacks Consensus Estimate of 36 cents.

California Water Service Group (CWT) announced second-quarter 2013 operating earnings of 28 cents per share, in line with the Zacks Consensus Estimate.

Middlesex Water Company (MSEX) reported second-quarter 2013 earnings per share of 28 cents, beating the Zacks Consensus Estimate by a penny.

Our View

Demand for water utility services fluctuates with weather. American Water Works’ performance in the quarter missed our estimates primarily due to weather variation.

American Water Works continues to make investments to maintain and upgrade its water and wastewater infrastructure.  The company is presently waiting for rate case decisions in five states in which it operates. A favorable decision will definitely help American Water Works to carry out the maintenance of its aging infrastructure.

Voorhees, N.J.-based American Water Works Company was founded in 1886. This water and wastewater utility caters to approximately 14 million residents across the country and parts of Canada. American Water Works Company currently has a Zacks Rank #4 (Sell).

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