On Dec 31, 2014, Zacks Investment Research upgraded American States Water Company (AWR) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #2 (Buy).
Why the Upgrade?
American States Water reported strong third-quarter 2014 performance with earnings of 54 cents per share beating the Zacks Consensus Estimates by 14.9%. Moreover, it reported positive earnings surprises in two out of the last four quarters with an average earnings beat of 13.3%. The expected earnings growth is 2%.
American States Water continues to maintain a strong cash position besides exhibiting its cash generation efficiency through operating activities. The company’s cash balance stood at $57.9 million as of Sep 30, 2014, up from $38.2 million at the end of 2013. In the nine months ended Sep 30, 2014, net cash provided from operating activities increased to $120.1 million from $87.3 million in the comparable period last year.
A robust financial position supports the company’s capital investments. In the first nine months of 2014, the company spent about $44 million as capital expenditure. The company projects 2014 capital expenditure in the range of $70 million – $75 million. It also expects to accelerate its capital expenditure in the coming year, leveraging on its strong balance sheet. For 2015, the company expects to spend in the range of $85 million – $90 million.
Apart from investing in numerous projects, American States Water utilizes funds to improve shareholder value through regular dividend payouts. The company has been paying regular dividends for the past 83 years with annual dividend increment in the past 60 years.
The Zacks Consensus Estimate for 2014 and 2015 saw an upside as few estimates moved north in the last 60 days. It moved up 2.1% to $1.47 (as 2 out of 5 estimates moved up) for 2014 and 2.6% to $1.58 (as 2 of 5 estimates moved north) for 2015.
Other Stocks to Consider
Some other stocks worth considering in the utility industry include Aqua America Inc. (WTR), Artesian Resources Corp. (ARTNA) and Pure Cycle Corporation (PCYO), each holding a Zacks Rank #2 (Buy).
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