Water utility American Water Works Company Inc. AWK received a contract worth $298 million from the U.S. Department of Defense. Per the contract, the company will maintain and operate the water and wastewater systems at Vandenberg Air Force Base, California for the next 50 years. The deal comes with an annual price adjustment clause allowing the company to adjust for price increases.
American Water Works won this contract by virtue of its expertise in providing quality services to military bases. Including the present deal, American Water Works’ unit Military Services Group will now serve 12 bases.
The Military Services Group provides water and wastewater services to military installations across the country as part of the federal government’s Utilities Privatization Program. The existing long-term contracts with the defense bases provide stability to the company’s earnings stream. Military Services Group is aiming to add new bases to further expand its defense customer count.
Apart from serving its defense customers, the company is also investing consistently to improve its overall infrastructure. Over the 2015–2020 timeframe, the company aims to invest $6 billion to expand its water and wastewater infrastructure.
The ongoing investments help the company to provide quality services to its expanding customer base. This also finds a reflection in its earnings performance. American Water Works is a consistent performer with the company surpassing estimates in the last four quarters with an average beat of 2.97%. It expects long-term earnings growth in the range of 7–10%.
American Water Works currently has a Zacks Rank #3 (Hold). Some better ranked water and wastewater services stocks include Connecticut Water Service Inc. CTWS, Artesian Resources Corp. ARTNA and Veolia Environnement S.A. VEOEY. Connecticut Water Service sports a Zacks Rank #1(Strong Buy) while Artesian and Veolia currently have a Zacks Rank #2 (Buy)
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