California Water Service (CWT) Units Buy Two Water Utilities
California Water Service Group’s CWT subsidiaries, Hawaii Water Service (Hawaii Water) and New Mexico Water Service (New Mexico Water), have acquired the assets of HOH Utilities, LLC (HOH Utilities) and Monterey Water Company (Monterey), respectively.
The acquisition of HOH Utilities’ wastewater system assets added 1,800 residential, commercial and resort customers, including three hotels, condominiums, multi-family housing, single-family homes and a golf course to its customer base of Hawaii Water.
The buyout of the Monterey water system added 380 residential customers to New Mexico Water’s customer base. The company will also get another 100 undeveloped lots that could also be served in the future upon development.
Timely repairs and maintenance of aging water and wastewater infrastructure are crucial to providing high-quality 24x7 services to customers. Both subsidiaries of California Water Service Group will make essential investments in the acquired assets to provide reliable services to customers and protect the environment.
Fragmented Industry Needs Consolidation
Per the American Society of Civil Engineers, nearly 50,000 community water systems and 16,000 wastewater treatment systems in the United States are presently providing water solutions to customers.
Some of the service providers are too small and have limited financial strength to carry out essential and costly repairs on time, leading to pipeline breakage and disruption of services and increasing the possibility of contamination.
Fragmentation in the water and wastewater industry is a headwind. Large water utility companies continue to acquire small players to ensure the extension of high-quality services to customers and the investments required to upgrade old and acquired assets.
California Water Service Group is expanding operations through inorganic routes. In August 2023, it completed the acquisition of Skylonda Mutual Water Company’s water system assets, which added 156 customers. The ongoing buyouts will further expand its operations.
Other water utilities, like American Water Works AWK and Essential Utilities WTRG, are making acquisitions to expand operations.
American Water Works, through its subsidiaries, is making systematic acquisitions and taking essential steps to upgrade the old infrastructure of its acquired assets. It added 7,900 customers till Sep 30, 2023, by acquiring 14 companies.
Essential Utilities has expanded its utility operations by completing several water and wastewater acquisitions, adding 129,000 customers. The six acquisitions completed in 2023 added 11,025 customers. At present, there are five pending acquisition deals for a total purchase price of $354 million, which, when completed, will add 211,000 customers to its existing base.
Price Performance
Over the last three months, shares of CWT have gained 10.5% compared with the industry’s 13.2% growth.
Image Source: Zacks Investment Research
Zacks Rank & Another Stock to Consider
California Water Service currently has a Zacks Rank #2 (Buy).
Another top-ranked stock from the same industry is Global Water Resources GWRS. The company presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GWRS’ long-term (three- to five-year) earnings growth rate is pegged at 15%. The Zacks Consensus Estimate for 2024 earnings of 30 cents per share reflects a year-over-year increase of 3.45%.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
