California Water Service (CWT) Arm Acquires Stroh's Water
California Water Service Group CWT announced that its unit, Washington Water Service (Washington Water), has completed the previously announced acquisition of Stroh’s Water Company’s water assets. This acquisition will add 900 customer connections.
Washington Water aims to increase water service reliability for Stroh’s Water Company customers by connecting Stroh’s system with its surrounding Gig Harbor systems in the future. (For more details: California Water Service Arm to Acquire Stroh's Water)
California Water Service Group has been expanding operations through the inorganic route. Last month, CWT’s other subsidiary, New Mexico Water Service, received approval to acquire the assets of Monterey Water Company, which, after completion, will add 380 new customer connections.
Consolidation Needed in Fragmented Water Industry
Per the American Society of Civil Engineers ("ASCE"), more than 50,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers.
A primary headwind in the U.S. water industry is that there are too many small operators with limited financial capabilities. Due to financial constraints, essential upgrades are sometimes deferred, resulting in infrastructure failure and the waste of precious potable water.
The consolidation of smaller operators under the large players will ensure proper maintenance and upgrade of water and wastewater infrastructure.
Investment in Water Space
Per the U.S. Environmental Protection Agency, an estimated $744 billion in investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years. Water utilities are gradually consolidating and investing in essential upgrades to their aging assets.
CWT is making regular investments in maintaining its infrastructure. It plans to invest more than $725 million in capital expenditures through 2024.
Other water utilities like Essential Utilities WTRG, American Water Works Company AWK and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
Essential Utilities plans to invest $1.1 billion in 2023 and $3.3 billion through 2025 to improve water and natural gas systems and better serve customers using improved information technology. AWK is making regular investments in maintaining its infrastructure. It aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion in the 2023-2032 time frame. Middlesex Water plans to invest $266 million during 2023-2025 to strengthen its water and wastewater infrastructure and provide services to customers in a safe, reliable and efficient manner.
Price Performance
Over the past three months, California Water Service’s stock declined 11.8% compared with the industry’s decline of 40%.
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Zacks Rank
California Water Service 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
Middlesex Water Company (MSEX) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
