Yahoo Finance American Water Works' (AWK) Arm to Buy Wastewater Systems
American Water Works AWK announced that its subsidiary Illinois American Water will acquire the Granite City’s wastewater treatment plant. This acquisition of sewer systems will add 26,000 new customers to the company’s existing clientele.
Illinois American Water has already made an application to the commission for approval of this acquisition, which is expected to come by the end of 2023 or early 2024.
Illinois American Water has been providing water service in Granite City for more than 125 years. In 2020, the company purchased the assets of the city’s wastewater collection system. The acquisition of the wastewater treatment plant will allow the company to take care of Granite City’s water and wastewater services. The company will utilize its expertise to meet the demand of its customers.
The Water Industry Needs Consolidation
Per the American Society of Civil Engineers ("ASCE"), more than 50,000 community water systems and 16,000 community wastewater systems in the United States are currently providing water solutions to customers. Per the ASCE finding, due to the delay in essential pipeline repairs and maintenance, 6 billion gallons of treated water is lost every day in the United States. Due to many small operators in the industry and a lack of adequate funds, essential upgrades and repairs of infrastructure get delayed at times.
The acquisition of small units by larger utilities ensures necessary investments in infrastructure upgrades and the continuation of high-quality services to customers. American Water Works is the largest and most geographically diverse, publicly traded water and wastewater utility company, which continues to widen its market footprint through strategic acquisitions.
Utilities Continue to Consolidate & Make Investments
Per the U.S. Environmental Protection Agency (“EPA”), an estimated $744 billion investment is necessary to maintain and expand the drinking water and wastewater services to meet demand over the next 20 years.
American Water Works continues to expand operations through acquisitions and organic means. In 2022, through 26 closed acquisitions in seven states, AWK added 70,000 customers to its base. AWK’s 21 pending acquisitions (as of Dec 31), when completed, will add another 32,400 customers.
The Zacks Consensus Estimate for American Water Works' 2023 earnings suggests year-over-year growth of 5.76%. The current dividend yield of the company is 1.7%.
Other water utilities, like SJW Group SJW, Consolidated Water Co. CWCO and Essential Utilities WTRG, are expanding operations through systematic acquisitions.
SJW Group completed more than 25 acquisitions in the 2010-2021 time frame and expanded operations. In January 2022, it closed the acquisition of Texas Country Water in Comal, TX. The deal added more than 1,900 water and wastewater customers to its existing customer base. The company plans to invest $1.5 billion in the next five years to further strengthen its infrastructure.
The Zacks Consensus Estimate for SJW Group's 2023 earnings implies year-over-year growth of 1.124%. The current dividend yield of the company is 1.9%.
Consolidated Water acquired the remaining 39% of PERC Water Corporation's ("PERC") equity ownership for $7.8 million. PERC’s strong operating performance, revenue growth and profitability, as well as its synergies with other areas of CWCO’s business and future growth prospects, are going to boost CWCO’s performance.
The Zacks Consensus Estimate for CWCO's 2023 earnings implies year-over-year growth of 75.9%. The current dividend yield of the company is 1.9%.
In 2022, Essential Utilities acquired three water and wastewater systems, which expanded its customer base by 23,000. Recently, Essential Utilities signed eight purchase agreements to acquire nine additional water and wastewater systems that are expected to serve 219,000 retail customers or equivalent dwelling units for $380 million. The company plans to invest $3.3 billion from 2023 through 2025 to fortify operations and efficiently serve the expanding customer base.
The Zacks Consensus Estimate for WTRG's 2023 earnings implies year-over-year growth of 5.6%. The current dividend yield of the company is 2.6%.
Price Performance
Over the last six months, American Water Works’ stock has gained 17.9% compared with the industry average of 15.3%.
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Zacks Rank
American Water Works currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
