Earnings Beat at Aqua America

Zacks

Aqua America Inc. (WTR) reported fourth-quarter 2013 earnings per share of 26 cents, beating the Zacks Consensus Estimate of 25 cents by a cent. On a year-over-year basis, earnings increased 18.2% on the back of cost-control initiatives and benefits from the execution of repair tax accounting at the Pennsylvania unit.

Accounting for a one-time impact of income from discontinued operations of 6 cents per share, GAAP earnings for the quarter stood at 32 cents per share.

For 2013, earnings came to $1.25 per share, surpassing the Zacks Consensus Estimate by 9.6% and increasing 11.6% year over year.

The positive surprise earned the confidence of shareholders, with the stock jumping 1.5% to $25.19 per share in the last trading session.

Revenue

The company’s operating revenues for the quarter were $188.6 million, missing the Zacks Consensus Estimate by 3.3%. Quarterly revenues marginally increased 0.6% year over year.

Revenues for the full year were $768.6 million, reflecting an increase of 1.4% over revenues in 2012. The upside was due to the completion of seven rate cases and benefits from the replacement of aging distribution systems.

In addition, the company increased its customer count by 1.3% via multiple acquisitions during the year.

Operational Update

In the quarter under review, Aqua America’s total costs and expenses increased 3.1% to approximately $119.0 million due to a rise in operations and maintenance expenses as well as depreciation expenses, and higher taxes (other than income taxes).

A marginal increase in revenue was more than offset by an increase in total costs and expenses. In the reported quarter, operating margin declined to 36.9% from 38.5% in the year-ago quarter.

Aqua America’s interest expenses totaled $19.5 million, slightly up from $19.4 million in the comparable year-ago period.

Financial Update

As of Dec 31, 2013, Aqua America’s current assets were $171.7 million versus $260.9 million as of Dec 31, 2012.

Long-term debt (excluding current portion) as of Dec 31, 2013 was $1.47 billion compared with $1.54 billion at the end of 2012.

Other Company Releases

American Water Works Company, Inc. (AWK) reported fourth-quarter 2013 adjusted earnings of 47 cents per share, in line with the Zacks Consensus Estimate.

American States Water Company (AWR) posted fourth-quarter 2013 earnings of 30 cents per share, beating the Zacks Consensus Estimate of 19 cents by 57.9%.

California Water Service Group (CWT) reported fourth-quarter 2013 earnings of 12 cents per share, beating the Zacks Consensus Estimate of 5 cents by an impressive 140.0%.

Our View

Aqua America continues to invest substantially in organic as well as inorganic growth projects. During 2013, the company spent roughly $300.0 million, under its capital investment program, to upgrade infrastructure distribution networks and replace older pipes.

Aqua America intends to continue with its capital expenditure plan by investing $325.0 million in 2014. In next 3 years, the company plans to invest more than a billion dollars to upgrade its existing infrastructure.  We expect timely completion of these ventures will help the Aqua America to supply clean water to its customers.

Aqua America currently has a Zacks Rank #3 (Hold).

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