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American Water Subsidiary Acquires Shorelands Water Company

Zacks Equity Research

American Water Works Company Inc. AWK announced that its subsidiary, New Jersey American Water, completed the acquisition of Shorelands Water Company. Shorelands is a privately held water service provider in Monmouth County, NJ.

The acquisition has been approved by the New Jersey Board of Public Utilities (BPU) on Mar 24, 2017. It will increase American Water Work’s customer count by nearly 11,000. The company provides water and wastewater services to nearly 15 million people in 47 U.S. states and Ontario, Canada.

Acquisition Spree

American Water Works seems to be on an acquisition spree for the last seven days. The company has successfully completed two acquisitions in the said period, which added nearly 1,850 customers to its existing base.

The previous acquisition was completed on Apr 1, 2017. American Water Works Company unit, California American Water acquired Meadowbrook Water Company in Merced County, which added nearly 1,700 customers. (read more:American Water Unit Acquires Meadowbrook Water Company)

Expansion via Acquisition

Consolidation is the need of the hour in the fragmented U.S. water utility space. The old infrastructure needs ample investments, which are easier for bigger players to make. Consolidation would therefore drive the necessary infrastructure overhauls for the industry at large.

American Water Works is quite active in the acquisition front and added 42,000 new customers through acquisitions in 2016. The company is expected to add another 40,000 in 2017 through the pending acquisition. Thanks to the acquisition spree, the company added nearly 12,850 customers to its existing base and is working towards meeting its 2017 acquisition target.

Another water utility, Aqua America Inc. WTR, is equally active in expanding its market reach through acquisitions. In 2016, the company added 14,399 customers to its existing base through organic growth and strategic accretions. The company expects to expand its customer base by 1.5% to 2% by 2017.

Connecticut Water Service Inc. CTWS is another water utility to be pretty active in the acquisition front. Connecticut Water, like some of its peers, has been engaged in strategic acquisitions of smaller water service providers. These continue to be a major part of the utility’s growth strategy. Since 2012, acquisitions have expanded the company’s customer base by 44%.

Price Movement

In the last three months, American Water Works’ shares returned 5.9%, outperforming the Zacks categorized Utility-Water Supply industry’s increase of 4.9%.

The utility is well poised to benefit from regulated investments to strengthen existing infrastructure as well as strategic acquisition, which, in turn, is expanding customer base and providing a boost to the top line.

Zacks Rank

American Water Works currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Artesian Resources Corporation ARTNA, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Artesian Resources Corporation’s 2017 Zacks Consensus Estimate moved up by 6.4% to $1.49 per share in the last 60 days.

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Connecticut Water Service, Inc. (CTWS): Free Stock Analysis Report
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