American Water Works Company, Inc. (AWK) unveiled its 2014 ongoing earnings guidance and reiterated 2013 adjusted earnings projections. The company’s share price edged up 1.4% from the previous day's closing price to $42.04 per share on Dec 18, 2013. The upward movement in the share price reflects the market’s positive reaction.
American Water Works expects its 2014 earnings in the range of $2.35 – $2.45 per share, up 8.3% to 10.4% year over year from 2013 earnings estimates. The company reaffirmed its 2013 adjusted earnings estimates in the band of $2.17 – $2.22 per share.
For 2012, American Water Works reported earnings of $2.11 per share. The company’s earnings guidance for 2013 and 2014 will rise from the 2012 level primarily on the back of financial as well as operational synergies from its acquisition programs.
We note that American Water Works’ acquisition strategy involves buying up assets having the same line of operations, which are immediately accretive. Year to date, the company has completed 15 acquisitions, including water as well as wastewater assets.
On Dec 16 2013, American Water Works acquired water system assets from the city of Whitwell in southeast Tennessee for $1.5 million. This acquisition helped the company to add almost 2,800 customers.
Under its capital expenditure program, American Water Works invested $665.3 million during the first nine months of 2013. The company plans to spend approximately $285 million in the last three months of 2013.
American Water Works’ steady effort towards acquisition of new assets while upgrading aging infrastructure will enable it to provide uninterrupted water supply to its customers. Further, the company’s strategy of increasing headcount and improving consumer safety will boost its near-term performance.
American Water Works currently has a Zacks Rank #3 (Hold). However, other better-ranked water utilities include Middlesex Water Co. (MSEX), with a Zacks Rank #1 (Strong Buy), and Connecticut Water Service Inc. (CTWS) and California Water Service Group (CWT), each with a Zacks Rank #2 (Buy).
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