American Water Works Company Inc. AWK is a utility company that provides natural gas and electricity services in the United States. The company focuses on providing safe, reliable and clean energy through consistent investments in infrastructure.
Let’s explore the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment.
Growth Projections
The Zacks Consensus Estimate for AWK’s 2023 earnings per share (EPS) is pegged at $4.79. This indicates a year-over-year increase of 6.2%.
The company’s long-term (three- to five-year) earnings growth is pegged at 8.2%. AWK delivered an average earnings surprise of 7.07% in the last four quarters.
Return on Equity (ROE)
ROE indicates how efficiently a company utilizes its funds to generate higher returns. AWK’s ROE is currently pegged at 10.31%, higher than the industry’s average of 8.98%, which indicates that the company is utilizing its funds more efficiently than its peers.
Debt Position & Liquidity
American Water Works’ times interest earned ratio at the end of second-quarter 2023 was 3.47. The ratio, being greater than one, reflects AWK’s ability to meet future debt obligations without difficulties.
The company had $3.46 billion net liquidity available as of Jun 30, 2023, which is adequate to meet its debt obligations.
Dividend History
The utility company has been consistently paying dividends to its shareholders. American Water Works raised its dividend in April 2023, taking the quarterly figure to 71 cents, resulting in an annual payout of $2.78 per share. This indicates 8.2% growth from 2022.
The company increased its dividend five times in the past five years. AWK’s current dividend yield is 2.02%, better than the industry’s average of 1.99%.
Systematic Investments & Customer Additions
American Water Works expects regulated acquisitions and investments-focused projects to drive capital expenditure of $2.9 billion in 2023. The aim is to provide improved water quality, reliability and earnings growth.
The company is expanding its customer base through organic initiatives and acquisitions. As of Jun 30, 2023, AWK had 7,100 customer connections through acquisitions. The pending acquisitions in 10 states, when completed, will add 74,800 customers to its network.
Price Performance
In the past three months, shares of AWK have lost 5% compared with the broader industry’s 39% decline.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks in the same industry are Consolidated Water Co. Ltd. CWCO, Essential Utilities Inc. WTRG and The York Water Company YORW, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
CWCO’s long-term earnings growth rate is 8%. The Zacks Consensus Estimate for 2023 EPS is pegged at 98 cents, implying a year-over-year improvement of 81.5%.
WTRG’s long-term earnings growth rate is 5.6%. The Zacks Consensus Estimate for 2023 EPS is pegged at $1.86, implying a year-over-year improvement of 5.1%.
The Zacks Consensus Estimate for YORW’s 2023 EPS is pegged at $1.53, implying a year-over-year improvement of 9.3%. The stock delivered an average earnings surprise of 4.23% in the last four quarters.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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