Aqua America WTR announced that it has entered into an agreement to buy the wastewater assets of Village of Manteno, IL. The agreement has been approved by the Illinois Commerce Commission and will add nearly 3,800 wastewater connections to its customer base. Under the agreement, the company’s subsidiary Aqua Illinois will purchase the system for $25 million.
Aqua America has been expanding its customer base through acquisitions, partnerships and organic growth. In 2017, the company added 10,854 new connections through organic growth and acquisitions. Aqua America further expects to add 16,325 new connections in 2018 through acquisitions.
Aqua Illinois has plans to invest $7.5 million in the next ten years to improve the existing water infrastructure of the Village of Manteno. This company will focus on improving reliability, capacity growth, and protect receiving streams through new and innovative treatment techniques.
Aqua Illinois already invested in multiple projects to improve quality, and reliability of its water and wastewater services in the state. The new customers, who will join the 250,000 people the company already serves in Illinois, will get benefited from the new projects.
Consolidation in Water Space
Water and wastewater operation is highly fragmented in the United States, and a large number of small operators are serving only a few hundred customers. It becomes very difficult for these small operators or municipalities to make large investments for upgrading and expanding their water and wastewater infrastructure.
It is easier for large companies to make arrangement for funds to carry out these major overhauls. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.
Last month, Aqua America announced that its subsidiary, Aqua Pennsylvania reached a joint settlement agreement to buy the wastewater assets of Limerick Township. (Read More: Aqua America Unit to Buy Limerick's Wastewater Assets)
Another water and wastewater service provider in the United States, American Water Works AWK, which is one of the largest, continues to widen its market footprint through strategic acquisitions. Till Jun 1, 2018, the company closed eight acquisitions, adding a total of 5,524 new customers. Pending 14 acquisitions as of the same date would increase American Water’s total customer base by 54,354 customers.
Price Movement
In a year’s time, shares of Aqua America have gained 10.4%, outperforming its industry’s growth of 2.7%.
Zacks Rank & Key Picks
Currently, Aqua America has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same sector are Global Water Resources Inc. GWRS and Dominion Energy Inc. D, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Water Resources’ long-term EPS is expected to grow 15%. The consensus estimate for 2018 has moved up 21.4% to 17 cents in the past 60 days.
Dominion Energy’s long-term EPS is anticipated to grow 6.08%. The consensus estimate for 2018 has been revised upward by 1.2% to $4.08 over the past 90 days.
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