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Is it Time to Add American Water Works (AWK) to Portfolio?

Zacks Equity Research

Shares of water and wastewater service provider, American Water Works Company AWK returned 7.28% in the last one month, outperforming the Zacks categorized Utility Water Supply industry’s increase of 4.91% in the same time period.

American Water Works’ consistent investments to strengthen regulated business, strategic acquisitions, and research and development activities to improve the quality of water are the primary catalysts behind the strong performance. Incidentally the company has surpassed the Zacks Consensus Estimate in the trailing four quarters with average positive earnings surprise of 3.43%.

The company aims to invest $6.7–$7.3 billion from 2017 through 2021, which will help it to improve earnings by 7–10% per year in the aforesaid period from a 2015 base. A major chunk of $5.9 billion will be directed to strengthen regulated businesses. More than 90% of its net income comes from regulated operations.

Consolidation is the need of the hour in the fragmented U.S. water utility space. American Water Works continues to expand operation through strategic acquisitions. During the 2016, the company added 42,000 customers to customer base through acquisitions. Another 40,000 customers will be added when the pending acquisitions have been completed by the company in 2017.

American Water Works also has a high quality research and development (R&D) program that ensures high quality of the water supplied to the customers. Consistent R&D is essential for providing high quality water to expanding customer base.

The company’s fourth-quarter 2016 earnings per share of 57 cents were higher than the Zacks Consensus estimate by 1.1% and the year-ago figure by 3.6%.The increase in earnings can be attributable to higher earnings at the Regulated businesses and Market-based businesses segments.

American Water Works Price and EPS Surprise

 

American Water Works Price and EPS Surprise | American Water Works Quote

Its 2017 and 2018 earnings estimates moved up by 3.9% and 3.6% respectively to $2.15 and $2.29 in the last 30 days.

Zacks Rank & Others Key Picks

Apart from American Water Works which carries a Zacks Rank #2 (Buy), other favorably placed water utilities worth adding to your portfolio are Artesian Resource Corporation ARTNA, Pure Cycle Corporation PCYO and SJW Corporation SJW.
 
Artesian Resource Corporation sports a Zacks Rank #1 (Strong Buy) and its shares have gained 5.7% year to date. You can see the complete list of today's Zacks #1 Rank stocks here.

SJW Corporation carries a Zacks Rank #2 and has reported a positive surprise of 3.08% in the last quarter.

Pure Cycle Corporation also carries a Zacks Rank #2 and has reported a positive surprise of 50% in the last quarter.

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American Water Works (AWK): Free Stock Analysis Report
 
Artesian Resources Corporation (ARTNA): Free Stock Analysis Report
 
SJW Corporation (SJW): Free Stock Analysis Report
 
Pure Cycle Corporation (PCYO): Free Stock Analysis Report
 
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