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American Water (AWK) Pennsylvania Arm Invests in Water Mains

American Water Works AWK recently announced that its unit, Pennsylvania American Water, has started working on a project to replace more than 6,600 feet of water mains in Montgomery County, PA. American Water Works’ arm will invest $3.4 million to replace the old mains that were installed in the 1930s. Pennsylvania American Water has already started replacing old 6" cast iron pipe with new 12" and 8" ductile iron pipe with new copper water supply services for customers in West Norriton Township and Lower Providence Township.

Pennsylvania American Water has been very active in upgrading and maintaining its water and wastewater infrastructure. Pennsylvania American Water invested nearly $373 million in 2021 alone to improve its water and wastewater treatment and pipeline systems. American Water’s unit is expected to continue capital investments to fortify its infrastructure and continue providing high-quality services to customers.

Rehabilitation work on the old water mains will increase water pressure in the pipelines to effectively serve customers' needs and help firefighters control emergency situations.

Investments - A Must for Aging Water Pipelines

The aging pipeline infrastructure results in pipeline breaks, creating the possibility of water contamination and ultimately resulting in the wastage of valuable potable water. This is a primary concern for the companies operating in the U.S. water utility space.

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 finding, a delay in essential pipeline repairs and maintenance results in the loss of 2.1 trillion gallons of treated water every year in the United States.

Per the U.S. Environmental Protection Agency, an investment of $473 billion is necessary to maintain and expand drinking water pipelines and $271 billion for wastewater pipelines to meet demand over the next 20 years. Frequent pipeline breaks result in the wastage of potable water and increase the risk of contamination. Hence, it is quite essential to make systematic investments for the repair and maintenance of the old infrastructure.

Water Utilities Making Regular Investments

Huge investment is required to upgrade the quality of water and wastewater infrastructure, and water utilities are making systematic investments to replace and upgrade the same.

American Water plans to invest in the $13-$14 billion range in the 2022-2026 period and within $28-$32 billion between 2022 and 2031 to upgrade as well as strengthen the existing water and wastewater infrastructure. Water utilities like California Water Service Group CWT, Essential Utilities WTRG and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.

California Water Service has $1.02 billion capital expenditure planned for the 2022-2024 time period. The current dividend yield of California Water Service is 1.8%.

Essential Utilities aims at investing $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%. WTRG pulled off an earnings surprise of 1.9% in the last four quarters, on average.

Middlesex Water plans to invest $229 million during the 2022-2024 period 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 earnings has moved up 7.7% in the past 60 days.

Price Performance

Shares of AWK have rallied 4.7% in the past month compared with the industry’s 2.8% growth.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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

California Water Service Group (CWT) : Free Stock Analysis Report

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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report

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