Leading Water Utility Faces Headwinds Despite Promising Revenue Growth
With a market cap of $25.2 billion, American Water Works Company, Inc. (AWK) stands out as a significant water and wastewater services provider across the United States. Based in Camden, New Jersey, the company serves about 3.5 million customers across 14 states, operating an extensive infrastructure network that includes treatment plants, pipelines, wells, and pumping stations.
Being valued at $10 billion or more places American Water Works in the “large-cap” stock category. The company supplies vital services through its Regulated Businesses segment to a diverse range of customers, including residential, commercial, industrial, and public sectors. This highlights AWK’s important role in sustaining water and wastewater systems crucial for community well-being.
In recent months, American Water Works has faced challenges, reflected in a 15.8% drop from its 52-week high of $150.68, reached on September 17. Over the past three months, shares have decreased by 14.8%, which contrasts sharply with the Dow Jones Industrials Average’s ($DOWI) 5.1% gain during the same timeframe.
Year-to-date, AWK is down 3.9%, lagging behind the DOWI’s impressive 15.8% return. When viewed over a 52-week span, shares of American Water Works have declined by 3.1%, while the Dow Jones has seen nearly a 17% rise.
Since October, AWK has exhibited a bearish trend, consistently trading below its 50-day moving average. Recently, it fell below its 200-day moving average, raising further concerns among investors.
On October 30, the company reported weaker-than-expected Q3 EPS of $1.80. Surprisingly, shares of AWK gained 1.8% the next day, buoyed by strong revenue figures and optimistic future projections. The company achieved a year-over-year revenue growth of 13.4%, totaling $1.3 billion, which surpassed estimates by 9.8%. This growth can be attributed to successful rate increases and customer additions. Additionally, American Water Works maintained its 2024 EPS guidance at $5.25 – $5.30 and set an ambitious outlook for 2025 at $5.65 – $5.75. Furthermore, it announced long-term capital investments ranging from $40 billion to $42 billion through 2034, which helps to instill confidence in investors.
Despite these positive indicators, AWK has struggled relative to its competitor, Essential Utilities, Inc. (WTRG), which has only seen a slight decline year-to-date and a 3.1% gain over the past year.
Experts are adopting a cautious stance on AWK’s future. With a consensus “Hold” rating assigned by 15 analysts, the mean price target stands at $144.33, indicating a potential 13.8% increase from current levels.
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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
