American Water (AWK) Pennsylvania Arm to Invest in Water Mains
American Water Works AWK announced that its unit, Pennsylvania American Water, would invest $2 million to install nearly 2,800 feet of new water main in Elizabeth Borough, Allegheny County. The addition of the water mains will increase water flow in the pipelines and assist the firefighters during an emergency.
Pennsylvania American Water has been active in upgrading and maintaining its water and wastewater infrastructure. Last year, the company invested $373 million to upgrade and maintain its water and wastewater infrastructure. Pennsylvania American Water plans to make an investment of $1.13 billion in water and wastewater systems through 2023 to provide reliable services to its customers.
Aging Water Infrastructure
The water and wastewater infrastructure of the water industry in the United States is aging and needs substantial investment. A delay in repair could cause frequent disruptions in the 24x7 supply of potable water and sewer services.
Per the findings of the American Society of Civil Engineers (“ASCE”), water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. Per the ASCE, due to the delay in essential pipeline repairs and maintenance, 2.1 trillion gallons of treated water is lost every year in the United States.
Per the U.S. Environmental Protection Agency, investments of $473 billion and $271 billion are necessary to maintain and expand drinking water pipelines and wastewater pipelines, respectively, to meet the demand over the next 20 years. Water infrastructure like storage tanks and water-purifying units also need maintenance at proper intervals.
Given the above scenario, it is quite evident that systematic investment to upgrade and maintain the old infrastructure and make provisions for adding new infrastructure will assist operators in meeting the demand from the rising customer base.
Utilities Making Systematic Investment
It is quite essential for water utilities to make systematic investments to maintain, upgrade and expand the existing water and wastewater infrastructure. American Water Works plans to invest $13-$14 billion during 2022-2026, and $28-$32 billion between 2022 and 2031 to upgrade and strengthen the existing water and wastewater infrastructure.
Other water utilities like Essential Utilities WTRG, California Water Service Group CWT and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
Essential Utilities aims to invest $3 billion through 2024 to strengthen water and natural gas operations. The Zacks Consensus Estimate for WTRG’s 2022 earnings indicates year-over-year growth of 6.6%. The long-term (three to five years) earnings growth of WTRG is currently pegged at 6.1%. The current dividend yield of Essential Utilities is 2.2%.
California Water Service has more than $1 billion in capital expenditure planned for 2022-2024. The current dividend yield of California Water Service is 1.6%. The Zacks Consensus Estimate for CWT’s 2023 earnings indicates year-over-year growth of 12.4%.
Middlesex Water plans to invest $229 million during 2022-2024 to strengthen its water and wastewater infrastructure for providing services to customers in a safe, reliable and efficient manner. The Zacks Consensus Estimate for MSEX’s 2022 and 2023 earnings indicates year-over-year growth of 15.5% and 10.5%, respectively. The current dividend yield of Middlesex Water is 1.2%.
Price Performance
Shares of AWK have risen 6.4% in the past three months compared with the industry’s 6.8% growth.
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Zacks Rank
American Water currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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