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Why Is American Water Works (AWK) Up 6.1% Since Last Earnings Report?

Zacks Equity Research
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A month has gone by since the last earnings report for American Water Works (AWK). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is American Water Works due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

American Water Works Q4 Earnings In Line, Revenues Lag

American Water Works Company posted fourth-quarter 2018 earnings per share of 69 cents, which is in line with the Zacks Consensus Estimate and the year-ago figure.
 
The company reported GAAP earnings of 62 cents against loss of 1 cent in the year-ago quarter.

Total Revenues
 

Total revenues of $850 million lagged the Zacks Consensus Estimate of $867 million by 2% but increased 3.5% from the year-ago figure of $821 million.

Highlights of the Release
 

Total operating expenses in the quarter were $602 million, up 11.1% from the year-ago period. The increase was primarily led by greater operation and maintenance expenses than the year-ago quarter.

Operating income was $248 million, down 11.1% year over year.

Segment Details
 
Regulated businesses’
net income was $118 million compared with $119 million in the year-ago quarter. Regulated businesses added 25,000 customers in 2018 through acquisitions and organic growth. The company is looking forward to add another 61,000 customers through acquisitions that are awaiting regulatory approval.

Market-Based businesses’ net income was $14 million, in line with the year-ago quarter.
 
Financial Highlights


Cash and cash equivalents were $ 130 million as of Dec 31, 2018, up 136.4% from the corresponding period of last year.
 
Long-term debt was $7,576 million as of Dec 31, 2018, higher than $6,498 million on Dec 31, 2017.

In 2018, the company made capital investments of $1.5 billion to strengthen its water and wastewater systems.

Guidance

American Water Works has affirmed its 2019 earnings guidance in the range of $3.54-$3.64 per share.

American Water Works plans to invest $8.0-$8.6 billion over the next five years and expects long-term EPS compound annual growth rate in top half of 7-10% range, anchored off 2017 EPS.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 7.2% due to these changes.

VGM Scores

Currently, American Water Works has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise American Water Works has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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