American Water (AWK) Arm to Replace Water Mains in Missouri
American Water Works Company AWK announced that its subsidiary, Missouri American Water has started to work on a project to replace nearly 4,300 feet old water mains in North Saint Louis County in the municipalities of Ferguson and Dellwood, MO.
In an effort to improve service reliability and prevent water main breaks, Missouri American Water will be replacing two parallel water mains, vintage 1928 and 1953, with a single 20-inch ductile iron water main. The installation of new mains and final paving restoration are expected to be completed by the end of 2018, subject to weather conditions.
American Water Works aims to invest within $8.4-$9.0 billion from 2018 through 2022, which will help it to improve earnings by 7-10% per year in the aforesaid period from a 2016 base. A major chunk of $7.2 billion will be directed to strengthen regulated businesses.
Aging Pipeline a Concern
A recent study from Utah State University showed that overall water main break over the last 6-year period has gone up 27% in the United States and Canada. The primary reasons behind water main failure are the aging water infrastructure and higher failures rates of smaller water utilities compared with larger ones.
Consolidation Continues in the Water Space
The overall water infrastructure is aging, and billions of dollars are needed to be invested for strengthening and upgrading the existing water infrastructure. It becomes very difficult for small operators or municipalities to make large investments for upgrading and expanding their water, and wastewater infrastructure.
It is easier for large companies to make arrangement for funds to carry out these major overhauls. American Water Works is one of the most active players and continues to widen its market reach through acquisitions. In the first half of 2018, the company added 5,600 new customers through completed acquisitions.
Global Water Resources, Inc. GWRS entered into an agreement to acquire four utilities in the past 18 months, in a bid to augment its inorganic and organic growth. Also, it is on track to achieve a double-digit customer growth rate in 2018.
Another water utility, Aqua America WTR expanded its utility operations by completing 70 acquisitions or other growth ventures during the five-year period ending Dec 31, 2017. The company aims to increase its customer base by 2-3% annually.
Zacks Rank and A Key Pick
Currently, American Water Works has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Middlesex Water Company MSEX, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Middlesex Water Company delivered an average positive earnings surprise of 6.83% in the trailing four quarters. Earnings estimates of the company have moved up 17.9% to $1.84 in the past 30 days.
Shares of both American Water Works and Middlesex Water Company have outperformed the industry in a year’s time.
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Middlesex Water Company (MSEX) : Free Stock Analysis Report
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