American States Water (AWR) Rides on Customer Base & Investments
American States Water Company’s AWR ongoing investments in upgrades is strengthening its infrastructure. The company has a strong utility customer base, which is increasing the demand for its services.
However, this Zacks Rank #4 (Sell) company’s excessive reliance on California for a significant portion of its earnings might affect its operations and financial results.
Tailwinds
American States Water expects capital expenditures of $140-$160 million for 2023. Its systematic investments drove the rate base from $752.2 million in 2018 to $1,152.3 million in 2022. New rates will help AWR in recovering the amount invested to upgrade and improve its infrastructure and continue with its infrastructure upgrade initiatives.
While the company has a strong utility customer base, it is increasing its electricity and water utility clientele at a slow but steady pace. AWR's subsidiary, American States Utility Services, has long-term contracts with military bases, which are 50-year firm fixed-price deals. The long-term defense pacts lend stability to the company’s earnings.
Headwinds
American States Water still focuses on a single state California, particularly Southern California, for its services. Consequently, the financial performance of the company, to a large extent, is dependent on the political, water supply, labor, utility cost and regulatory risks as well as economic conditions, natural disasters and other risk factors affecting the state.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Water Co. Ltd. CWCO, sporting a Zacks Rank #1 (Strong Buy), and Global Water Resources, Inc. GWRS and Veolia Environnement VEOEY, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CWCO’s long-term (three to five year) earnings growth rate is 8%. The Zacks Consensus Estimate for CWCO’s 2023 earnings per share (EPS) implies growth of 79.6% year over year.
GWRS’ long-term earnings growth rate is 15%. The Zacks Consensus Estimate for GWRS’ 2023 EPS indicates a year-over-year increase of 29.2%.
VEOEY’s long-term earnings growth rate is 11.7%. The Zacks Consensus Estimate for VEOEY’s 2023 EPS implies improvement of 206.8% from that recorded in 2022.
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American States Water Company (AWR) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
Veolia Environnement SA (VEOEY) : Free Stock Analysis Report
Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report
