On Mar 6, 2014, Zacks Investment Research upgraded American States Water Company (AWR) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
American States Water reported positive earnings surprises in the past 4 quarters with an average earnings beat of 27.3%. The company’s long-term expected earnings growth is pegged at 1.0%.
In the fourth quarter of 2013, American States Water reported earnings of 30 cents per share, beating the Zacks Consensus Estimate of 19 cents by 57.9%. Also, quarterly earnings jumped 11.1% year over year, primarily due to an improvement in margin under the Water segment as a result of positive impact from the water general rate case, and lower total operating expenses.
We appreciate American States Water’s steady effort towards reduction of its debt level. The company’s long-term debt reduced by 1.9% to $326.1 million as of Dec 31, 2013 from $332.5 million at year-end 2012.
In addition, American States Water continues to exhibit its efficiency in terms of improving its operating cash flow. In 2013, the company’s net cash from operating activities was $135.7 million, up 33.7% from the year-ago comparable period primarily due to billing of several surcharges employed at its unit Golden State Water Company during 2013 in connection with the net Water Revenue Adjustment Mechanism under-collection.
American States Water’s cash and cash equivalents also increased 62.6% to $38.2 million as of Dec 31, 2013 from $23.5 million as of Dec 31, 2012.
The financial flexibility and strong performance have enabled American States Water to invest more to upgrade aging water and sewer infrastructure and construct new assets. For 2013, the company’s capital expenditures increased 43% to $97.4 million from $68.1 million in the prior year. Over the 2013 – 2015 timeframe, Golden State Water Company plans to invest $255 million under its capital expenditure program.
Apart from utilizing funds for infrastructure development, American States Water also has a steady dividend payment history. During 2013, the company paid $29.4 million as common stock dividend. The practice of returning wealth to shareholders will help to keep investor interest on the stock.
Other Stocks to Consider
Some other stocks worth considering in the water utility industry include Middlesex Water Corporation (MSEX), Connecticut Water Service Inc. (CTWS) and The York Water Company (YORW). While Middlesex Water holds a Zacks Rank #1 (Strong Buy), Connecticut Water Service and The York Water carry a Zacks Rank #2 (Buy).
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