American Water's (AWK) Unit to Fortify Operation in Garwood
American Water Works Company AWK announced that its subsidiary, New Jersey American Water has decided to invest $3 million for strengthening its 13,000-foot water main located in Garwood, NJ. The cleaning and lining process is already underway, which will remove sediment from inside the water main and then the inner surface of the main will be lined with a cement sealant.
New Jersey American Water has been consistently working to improve the quality of water and reliability of its services. The $3-million project is part of the company’s multimillion dollar program to treat and upgrade the water infrastructure that is nearing the end of its useful life.
New Jersey American Water provides services to 623,000 water customers and 34,000 wastewater customers in New Jersey and operates 8,900 miles of pipeline (water and wastewater) in the state. In 2018, New Jersey American Water already invested nearly $139.4 million in different infrastructure projects in New Jersey and more projects are lined up to improve the quality of its services.
Another water utility Middlesex Water Company MSEX announced that it is all set to commence water infrastructure upgrade in the Avenel section of Woodbridge Township, NJ. The company will invest $11.2 million for renovation or replacement of the aging water facilities. (Read more: Middlesex Water to Start $11.2M Water Infrastructure Upgrade)
Upgradation of Aging Infrastructure
The U.S. water infrastructure in quite old, and massive investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Replacement of old transmission mains and upgradation of treatment plants require investment of billions of dollars, which can thereby improve the water infrastructure.
American Water Works aims to invest $8.0-$8.6 billion from 2018 through 2022, which will help to improve earnings by 7-10% per year in the aforesaid period from a 2016 base. In 2018, the company plans to invest in the range of $1.9-$2.1 billion for capital expenditures and acquisitions.
Aqua America WTR, another water utility, aims to make capital investments in excess of $500 million in 2018, which is part of an ambitious investment target of more than $1.4 billion in the 2018-2020 time period.
Consolidation in the Water Space
The water utility industry offers excellent growth opportunities and as a consequence, we are noticing a rising interest in this space, shown by companies that were earlier focused primarily on other businesses.
American Water Works is quite busy on the acquisition front. Till Jun 1, 2018, the company added 5,524 new customers through completed acquisitions. The pending acquisitions, when completed, are expected to add more than 54,000 customers to its customer base.
In a year’s time, shares of American Water have gained 9.6% against its industry's decline of 0.1%.
Zacks Rank & A Key Pick
Currently, American Water Works has a Zacks Rank #3 (Hold). A better-ranked stock from the same sector is Eversource Energy ES, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Eversource Energy’s long-term EPS is expected to grow 5.75%. The Zacks Consensus Estimate of $3.25 for 2018 and $3.44 for 2019 is depicting year-over-year growth of 4.5% and 5.91%, respectively.
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