American States Water (AWR) Gains from Capex, Customer Base

·3 min read

American States Water Company’s AWR planned investments in strengthening its aging water infrastructure along with a sturdy utility customer base act as tailwinds. Also, consistent contribution from its American States Utility Services (ASUS) unit aids its operations.

The Zacks Consensus Estimate for 2021 and 2022 earnings is pegged at $2.47 and $2.56 per share, indicating respective growth of 6.01% and 3.85% from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 3.63%, on average.

Shares of this current Zacks Rank #3 (Hold) player have gained 5.5% in the past six months, outperforming the industry’s rise of 3.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six-Months Price Performance

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What’s Aiding the Stock?

After investing $37.1 million in first-quarter of 2021, the company expects to spend in the range of $120-$135 million during the whole year on regulated utilities. Golden State Water Company (GSWC), a subsidiary of the utility, filed a general rate case application for all water regions and at the general office for new rates pertaining to the years 2022, 2023 and 2024.

The new application includes capital budget requests of $450.6 million for the above-mentioned three-year period. Along with American States Water Company, other water utilities like Middlesex Water MSEX, American Water Works AWK and California Water Service CWT are also investing heavily in their infrastructure for maintenance, upgrade and enhancement.

Also, the company has a solid customer base and is adding electricity and water utility customers at a slow but steady pace through acquisitions and organic means. American States Water Company’s Water segment is a major contributor to its total revenues.

Notably, ASUS has long-term contracts with 11 military bases, which are 50-year firm fixed-price deals. The long-term defense contracts lend stability to the company’s earnings. This unit is expected to contribute 45-49 cents per share to its current-year earnings.

Headwinds

American States Water Company’s dependence on a single state (California) for recognizing a significant chunk of its earnings is a huge downside. Also, the company operates in a highly regulated environment and any changes in the existing laws and conditions could affect its business.

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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report

California Water Service Group (CWT) : Free Stock Analysis Report

American States Water Company (AWR) : Free Stock Analysis Report

Middlesex Water Company (MSEX) : Free Stock Analysis Report

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