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Rate Approval to Raise Aqua America's (WTR) Revenues by $2.9M

Zacks Equity Research

Aqua America Inc.’s WTR North Carolina subsidiary received approval from the North Carolina Utilities Commission for a revenue increase of $2.9 million, or 5.2%. The rate hike will allow the company to recoup expenses for strengthening its infrastructure and improving the quality of services it offers to customers.

Since the previous rate hike in 2014, the company has invested $94 million to upgrade and replace portions of aging water infrastructure. The rate revision will help it to continue with infrastructure strengthening activities.

Aging Water Infrastructure

The existing water and wastewater infrastructure in the United States is aging and requires massive investments for upgradation and replacement of the old and soiled pipelines. The rising demand for water and wastewater services also calls for additions of new pipelines, treatment facilities and storage reservoirs.

The same view is echoed by the U.S. Environmental Protection Agency’s (“EPA”) estimate of national drinking water and wastewater needs. EPA estimates of more than $743 billion are needed for water infrastructure improvements.

Water Utilities Continue to Invest

Amid the above backdrop, water utilities are continuously investing to strengthen infrastructure, with investment varying with their size and capability. Aqua America targets to invest more than $1.4 billion in the 2018-2020 time period. The periodic rate hike will help the company to keep on investing.

Another water utility, American Water Works AWK aims to invest within $8-$8.6 billion from 2019 through 2023, which will help it to improve earnings by 7-10% per year in the aforesaid period from a 2017 base.

Price Movement

Shares of Aqua America have underperformed its industry in the past three months.

Zacks Rank and Key Picks

Aqua America currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are Middlesex Water Company MSEX, sporting a Zacks Rank #1 (Strong Buy), and Consolidated Water Company CWCO, holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Middlesex Water delivered average positive earnings surprise of 16.9% in the trailing four quarters. Earnings estimates of the company have been revised 6.5% upward to $1.96 in the past 60 days.

Consolidated Water delivered average positive earnings surprise of 1.85% in the trailing four quarters. Earnings estimates of the company have been upwardly revised by 29.8% to 74 cents in the past 60 days.

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Middlesex Water Company (MSEX) : Free Stock Analysis Report
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