American Water's (AWK) Illinois Unit Invests $297M in 2023
American Water Works’ AWK unit, Illinois American Water, recently announced that it invested $297 million in different projects to upgrade water and wastewater infrastructure throughout the state in 2023. This upgrade work includes installing new pipes, pumps, hydrants, valves, lift stations, water treatment facilities, storage tanks, new water quality systems and technology.
In the central division of its service territory, the company invested $76.7 million in 2023 to upgrade infrastructure to provide high-quality services to its water and wastewater customers. Illinois American Water has been making systematic investments to upgrade its infrastructure. The company has invested $1.6 billion in the past decade to make its asset portfolio reliable.
Water and Wastewater Service Industry Needs Investment
The water and wastewater infrastructure is aging and gradually nearing the end of its effective service life. Per the findings of the ASCE, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. This industry needs more investment for maintenance and upgrades. Per the U.S. Environmental Protection Agency (“EPA”), an estimated $744 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.
American Water is one of the major operators in the United States water space, having a well-chalked-out capital expenditure plan to upgrade and expand its widespread assets. In 2024, the company aims to invest $3.1 billion, with a major portion utilized for infrastructure improvements in Regulated Businesses. Over the long-term, American Water aims to invest in the range of $16-17 billion in the 2024-2028 period and in the range of $34-$38 billion in the 2024-2033 period.
The massive investment requirement also creates an opportunity for growth for the operators in this space. Another water utility, Essential Utilities WTRG, plans to invest $1.1 billion annually in the 2023-2025 period to strengthen its water and natural gas operations further.
California Water Service Group CWT is also expanding operations through inorganic routes. It is expected to invest $360 million and $365 million in 2023 and 2024, respectively, to upgrade its infrastructure and efficiently serve its expanding customer base.
Miles of water and sewer pipelines spread across the United States need urgent repair. The government is also coming forward to provide assistance to upgrade the aging infrastructure. The Bipartisan Infrastructure Law provided $50 billion to the EPA to strengthen the drinking water and wastewater systems of the United States. A major portion of the investment will be directed toward upgrading water infrastructure serving disadvantaged communities.
Price Performance
Over the past month, shares of AWK have gained 4.4%, which is in line with the industry’s growth.
Image Source: Zacks Investment Research
Zacks Ranks & Another Stock to Consider
American Water currently has a Zacks Rank #2 (Buy).
Another top-ranked company from the same industry is Global Water Resources GWRS, currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GWRS’ long-term (three- to five-year) earnings growth rate is pegged at 15%. The Zacks Consensus Estimate for 2023 earnings of 29 cents per share reflects an increase of 7.4% over the past 60 days.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
