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Middlesex Water (MSEX) to Continue Work on Ongoing Projects

Zacks Equity Research

Middlesex Water Company MSEX announced that it is proceeding with ongoing construction projects like Water Treatment Plant upgradation, completion of 42” 4.5-mile Western Transmission Main and numerous other projects to maintain and enhance the reliability and resiliency of its water treatment and distribution systems, despite the ongoing coronavirus (COVID-19)-induced crisis.

Timely development, maintenance and repair of the old pipelines are quite essential in preventing wastage of potable water. The COVID-19 crisis has once again highlighted the importance of clean water. It is to be noted that numerous pipeline breaks across the United States results in wastage of billions of gallons of water every year.

Clean Water: The Need of Hour

With the coronavirus crisis showing no signs of letting up, the ensuing fear and panic is adversely impacting the global economy. Despite the scenario, the Utilities have been providing 24X7 basic services like electricity, water and natural gas to millions of customers. Water, especially, has been playing a crucial in prevention and containing the spread of novel coronavirus.

The U.S. Environmental Protection Agency (EPA) recommends that Americans continue to use and drink tap water as usual as it is not contaminated with COVID-19 virus. Moreover, washing hands at regular intervals is essential in checking the spread of the virus.

Notably, Utility - Water Supply companies have already announced their plans to continue providing water and wastewater services. Moreover, companies like Water, American Water AWK and California Water Service Group CWT have decided to continue providing water and wastewater services to their customers despite non-payment of service dues.

Capital Intensive Utilities to Gain From Low Rates

Water utility operation is a very capital intensive operation. Millions of dollars are required to expand infrastructure, maintain the existing ones and replace the old and soiled pipelines to prevent wastage. The utility operators have to borrow to fund their long-term capital projects and improve resilience of their services.

The cope with the economic crisis triggered by COVID-19, the Federal Reserve has lowered interest rate by a percentage point to near zero level. U.S. interest rate is now in a range of 0 to 0.25%, down from a range of 1-1.25%.

Middlesex Water Company aims to invest $295 million through 2020 to 2022. In fact, short term and long-term borrowings are its primary sources to fund its capital program. The company is definitely going to benefit from the near zero interest level and can fund its program with lower than previously expected capital costs.

Price Movement

Shares of Middlesex Water have lost 2.6% compared with the industry’s decline of 9.3% in the past 12 months.

Zacks Rank & Another Stock to Consider

Currently, Middlesex Water has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Another stcok that investors can consider is American States Water Company AWR, which carries the same Zacks Rank as Middlesex Water.

The Zacks Consensus Estimate for American States Water for 2020 EPS has improved 3.2% over the past 60 days. Additionally, its 2020 earnings are expected to improve 4.69% on a year-over-year basis.

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Middlesex Water Company (MSEX) : Free Stock Analysis Report
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
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