American Water Works Faces Stock Struggles Amid Growth Prospects
Camden, New Jersey-based American Water Works Company, Inc. (AWK) stands as a prominent player in water and wastewater services, holding a market capitalization of $26.9 billion. The company caters to around 3.5 million customers across 14 states, operating an extensive network of treatment plants, pipelines, and storage facilities to manage water efficiently and reliably.
Slight Growth But a Bigger Market Rally
In the last 52 weeks, shares of American Water Works have not fared well compared to the broader market. Over this period, AWK stock has risen 4.6%, while the S&P 500 Index ($SPX) has seen a significant increase of 31.1%. In 2024, AWK has gained 4.7%, versus SPX’s impressive 24.1% year-to-date performance.
Further analysis shows that AWK has also trailed behind the Utilities Select Sector SPDR Fund’s (XLU) 29.2% return over the past year, as well as its 27% YTD gain.
Mixed Earnings Results Impact Stock Performance
On October 30, AWK reported a weaker-than-expected Q3 EPS of $1.80, yet shares rebounded by 1.8% the following day. This recovery was driven by the company surpassing revenue expectations with a total of $1.3 billion, up 13.4% from the previous year. Investors remained optimistic about AWK’s strong long-term growth outlook, affirming its annual earnings and dividend growth expectations of 7%-9%, along with a solid capital expenditure strategy. Additionally, the company acquired 33,400 new customers and provided positive EPS guidance for 2024, estimating it between $5.25 and $5.30.
Future Expectations from Analysts
For the current fiscal year ending in December, analysts project a 7.6% year-over-year growth in AWK’s EPS, predicting it will reach $5.27. The company’s earnings history has shown variability, with it surpassing consensus estimates once out of the last four quarters while falling short three times.
Currently, the consensus rating among the 15 analysts covering AWK is a “Hold,” based on three “Strong Buy” ratings, one “Moderate Buy,” eight “Holds,” two “Moderate Sells,” and one “Strong Sell.” This rating is a bit less optimistic than three months earlier when there were four “Strong Buy” ratings.
Analyst Upgrade Offers Potential Hope
On November 19, analyst Gregg Orrill from UBS upgraded AWK’s rating to “Buy,” setting a price target of $155. His confidence stems from expectations of 8% earnings growth through 2028, despite anticipated challenges. The upgrade reflects American Water’s robust balance sheet, a $1 billion increase in its capital plan, and growth potential discussed at the Edison Electric conference.
As of now, AWK is trading below the mean price target of $144.42. The highest target of $164 suggests a potential upside of 18.7%.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
