U.S. markets closed
  • S&P 500

    4,241.84
    -4.60 (-0.11%)
     
  • Dow 30

    33,874.24
    -71.34 (-0.21%)
     
  • Nasdaq

    14,271.73
    +18.46 (+0.13%)
     
  • Russell 2000

    2,303.47
    +7.52 (+0.33%)
     
  • Crude Oil

    73.28
    +0.43 (+0.59%)
     
  • Gold

    1,778.70
    +1.30 (+0.07%)
     
  • Silver

    25.93
    +0.08 (+0.30%)
     
  • EUR/USD

    1.1930
    -0.0013 (-0.11%)
     
  • 10-Yr Bond

    1.4870
    +0.0150 (+1.02%)
     
  • GBP/USD

    1.3962
    +0.0015 (+0.10%)
     
  • USD/JPY

    110.9590
    +0.3240 (+0.29%)
     
  • BTC-USD

    33,140.14
    +739.55 (+2.28%)
     
  • CMC Crypto 200

    793.59
    -16.61 (-2.05%)
     
  • FTSE 100

    7,074.06
    -15.95 (-0.22%)
     
  • Nikkei 225

    28,874.89
    -9.24 (-0.03%)
     

Essential Utilities (WTRG) to Gain From Investment, Buyouts

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

We recently initiated coverage on Essential Utilities WTRG. This water utility with its steady capital investment, strategic acquisitions, customer additions and organic growth is expected to be a consistent performer in its industry over the long run.

This Zacks Rank #3 (Hold) stock delivered an average four-quarter earnings surprise of 4.6%. Its long-term (three to five years) earnings growth is currently pegged at 6.34%. Moreover, its current dividend yield of 2.31% is better than its industry average of 1.6%.

Tailwinds

Massive infrastructural investments are required to upgrade and maintain the water utilities, as old and soiled water pipelines are quickly nearing their effective service life. Essential Utilities has plans to make the necessary investments to strengthen its natural gas infrastructure. In 2021, the company aims to invest $550 million in the water segment and $450 million in the natural gas segment. The company plans to invest $3 billion through 2023 to fortify operations and efficiently serve the expanding customer base.

During the five-year period ended Dec 31, 2020, Essential Utilities expanded utility operations by completing 46 acquisitions of water or wastewater utilities and other growth ventures. During 2020, the company closed four acquisitions, which added 12,184 new customers. The acquisition of People Gas in 2020 has helped the company to diversify its operation and venture into the natural gas business. Another water utility American Water Works AWK has successfully acquired 62 water utilities and 44 wastewater utilities since 2015, which added 211,000 customers to its customer base. In 2020, it successfully closed 23 acquisitions by adding 37,800 customers and expanding operations in the United States. Water utility, Global Water Resources GWRS is also making acquisitions and the necessary investments to expand as well as strengthen operations, and upgrade the acquired assets for providing efficient services to customers.

Rate hikes application and approval from the commission help the company to recoup expenditure and fund future capital projects. Rate cases completed in 2020 increased its top line by $21 million on an annual basis. Cases completed in 2021 are expected to increase annual revenues by $8.5 million. The pending water rates, on completion, are expected to further increase annual revenues by $1.8 million. Rate hikes completed in the natural gas segment increased its annual revenues by $1 million in 2020. Essential Utilities does not have any pending natural gas rates cases.

Headwind

Water utilities always run the risk of contamination of water supplied to its customers, despite implementing the best safety measures.

Price Performance

Shares of Essential Utilities have outperformed the industry in the past six months.

Zacks Rank and a Key Pick

Essential Utilities currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is California Water Service Group CWT, currently having a Zacks Rank of 2 (Buy).

California Water Service’s current dividend yield is 1.7%, which is better than its industry’s average yield. The Zacks Consensus Estimate for earnings per share of California Water Service for 2021 and 2022 has moved up 3.5% and 6.8%, respectively, in the past 60 days.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

To read this article on Zacks.com click here.

Zacks Investment Research