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American Water's (AWK) Missouri Arm to Invest in Water Mains

·4 min read

American Water Works AWK recently announced that its unit, Missouri American Water, will invest $2.4 million for replacing more than 9,200 feet of aging water mains in Mexico, MO. American Water’s unit will upgrade 4-inch, 6-inch, and 10-inch cast iron water lines with new 8-inch and 12-inch PVC mains. The company will also check all crossings, hydrants and valves and make the necessary repairs and upgrades to improve the overall water infrastructure in the region.

Replacement of the aging water mains is essential to ensure water quality and system pressures as well as increase system resiliency. The increase in water pressure in the new pipelines helps firefighters control emergency situations. Missouri American Water provides water and wastewater services to nearly 1.5 million customers, and these upgrades increase the resilience of its infrastructure and allow it to serve customers efficiently.

Aging Pipelines a Serious Concern for Water Industry

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 ASCE findings, 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.

Frequent pipeline breaks result in the wastage of potable water and increase the risk of contamination. A substantial portion of the existing water and wastewater pipelines in the United States is aging, and it is quite essential to make systematic investments for the repair and maintenance of the old infrastructure.

Investment Essential for Water Industry

Given the current situation, the U.S government and utility operators are making the required investments to upgrade the aging infrastructure. Per the U.S. Environmental Protection Agency (“EPA”), a $473 billion investment is necessary to maintain and expand drinking water pipelines and $271 billion for wastewater pipelines to meet demand over the next 20 years.

EPA’s estimates clearly indicate that huge investments will be required to provide safe drinking water and sewer services to millions of consumers in the United States. The U.S. government has made provisions to upgrade the aging water and wastewater assets. The American Jobs Plan has provisions for $111 billion in water and wastewater infrastructure upgrades. Investor-owned water utilities are also making systematic investments to upgrade the aging infrastructure.

American Water plans to invest $13-$14 billion in the 2022-2026 time period and $28-$32 billion between 2022 and 2031 to upgrade as well as 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 2023 to strengthen water and natural gas operations. The long-term (three to five years) earnings growth of WTRG is 6.2%. WTRG pulled off an earnings surprise of 1.45% in the last four quarters, on average. The Zacks Consensus Estimate for Essential Utilities’ 2022 earnings indicates 7% year-over-year growth.

California Water Service reaffirmed 2021 capex estimates within $270-$300 million. Also, the midpoint of CWT’s capital expenditure planned for 2022, 2023, and 2024 is $355 million, $360 million, and $365 million, respectively. The current dividend yield of CWT is 1.51%.

Middlesex Water has plans to invest $200 million during the 2022-2023 time period to strengthen its water and wastewater infrastructure to provide services to customers in a safe, reliable as well as efficient manner. The current dividend yield of MSEX is 1.16%. The Zacks Consensus Estimate for Middlesex Water’s 2022 earnings indicates 14.4% year-over-year growth.

Shares of Essential Utilities, California Water Service, and Middlesex Water have returned 0.2%, 9.1%, and 24.3%, respectively, in the past year.

Price Performance

Shares of American Water have lost 2.8% in the past year against the industry’s 1.2% growth.

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Zacks Investment Research

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Zacks Rank

American Water Works currently has a Zacks Rank #4 (Sell).

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

Middlesex Water Company (MSEX) : Free Stock Analysis Report

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

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