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Strong Buy on Connecticut Water

Zacks Equity Research

On Sep 21, Zacks Investment Research upgraded Connecticut Water Service Inc. (CTWS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Connecticut Water Service Inc. has witnessed rising earnings estimates on the back of solid second quarter results. The water utility has delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 6.61%. Investors reacted positively with the share price increasing 7.4% from the second quarter release, closing at $32 yesterday.

The two-year rate reduction approval received by Connecticut Water Service’s subsidiary and the introduction of Revenue Adjustment Mechanism (‘RAM’) are likely to benefit the company. Effective from April 2014, these regulatory decisions will help CTWS to retain customers and engage in service reliability investments.

The financial flexibility and strong performance have enabled the company to pay regular dividends and increase the annual dividend rate in each of the last 44 years, indeed making the stock attractive. Another water utility, American States Water Company (AWR) has been distributing dividends for the last 82 years.

The Zacks Consensus Estimate for 2013 increased 8.8% in the last 60 days to $1.60 per share, which reflects year-over-year growth of 12.39%. For 2014, the Zacks Consensus Estimate increased 9.6% in the last 60 days to $1.71 per share, which reflects year-over-year growth of 7.02%. The long-term earnings growth of the company is presently pegged at 5.00% on the back of sales growth of 12.16%.

Other Stocks to Consider

Besides Connecticut Water, a few other water utilities are also performing well and have a favorable Zacks Rank. The stocks worth considering are SJW Corp. (SJW) and Consolidated Water Co. Ltd. (CWCO). SJW Corp. carries a Zacks Rank # 2 (Buy) while Consolidated Water has a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CTWSRead the Full Research Report on SJWRead the Full Research Report on CWCORead the Full Research Report on AWRZacks Investment Research