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American Water Unit Invests $2.5M for Infrastructure Upgrade

Zacks Equity Research

American Water Works Company AWK announced that its subsidiary, New Jersey American Water, will invest in excess of $2.5 million to install new water mains within Rumson and under the Shrewsbury River in Rumson and Sea Bright.

The company aims to install 1,950 feet of 16-inch high-density polyethylene pipe to replace the nearly seven decades old concrete cylinder water main. The replacement of the mains will lower the possibility of failure of the water pipes and ensure continuous supply to its customers in the region.

The new pipes will be laid about 47 feet below the river bed and if the project continues as per plans, the work will be completed around Apr 21. American Water Works’ unit serves around 2.7 million customers. Regular maintenance and upgradation of the infrastructure will help the company provide them quality services.

Continued Maintenance Work
 
The company, along with its subsidiaries, continues to strengthen the existing infrastructure by replacing old and damaged pipelines. Last month, New Jersey American Water announced its decision to invest nearly 4.2 million to replace the old water mains in North Plainfield and Cranford. (read more: American Water Unit to Invest $4.2M to Replace Water Mains)

For 2017, American Water Works’ capital investment budget is $1.5 billion. The company aims to invest $6.7–$7.3 billion from 2017 through 2021.

Investment Essential in Water Space

The overall water infrastructure in the U.S. is quite old and almost at the end of its life. Some of the water mains are nearly a century old and require immediate replacement.  In addition, the increase in customers calls for new water mains addition. Hence, all big operators in this fragmented water utility space are investing on a regular basis to upgrade and improve the quality of their existing infrastructure.

Aqua America Inc. WTR, another water utility, has plans to make capital investments of over $450 million in 2017 as part of an ambitious investment target of over $1.2 billion in the 2017-2019 period. Connecticut Water Service Inc. CTWS aims to invest more than $150 million in the 2017–2019 time frame to strengthen its existing water infrastructure.

Price Movement

In the last three months, American Water Works’ shares have returned 9.7%, outperforming the Zacks categorized Utility-Water Supply industry’s increase of 8.9%.


The utility is well poised to benefit from strategic acquisition and regulated investments to strengthen existing infrastructure, 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). The company is a consistent performer and has surpassed Zacks Consensus Estimates in three out of the last four quarters, resulting in an average beat of 3.43%.

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
 
American Water Works (AWK): Free Stock Analysis Report
 
Artesian Resources Corporation (ARTNA): Free Stock Analysis Report
 
Aqua America, Inc. (WTR): Free Stock Analysis Report
 
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