American States Water: A Strong Buy - Analyst Blog


On Jan 9, Zacks Investment Research upgraded American States Water Company ( AWR ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Consistent performance from this water utility and strong third-quarter results sparked upward earnings estimate revisions.  Moreover, this utility delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 17.6%. The long-term expected earnings growth rate for this stock is 6.0%    

American States Water Company reported third-quarter earnings on Nov 5. Non-GAAP earnings per share of 97 cents per share surpassed the Zacks Consensus Estimate by 21.2% and outpaced the year-ago figure by 16.9%.

Impressive performance from its Water and Contracted Services segments helped total revenue to reach $133.5 million and beat the year ago results by 11.5%.

During the quarter the company successfully curtailed net interest expenses by 12.7% to $5.4 million from $6.1 million incurred in the year-ago period. The reduction in short-term borrowing and higher interest income led to the decline in net expenses.

Consistent dividend payments since 1931 make the shares attractive. An annual dividend of $1.42 per share results in a dividend yield of 2.9%, higher than the industry average of 1.86%.

The average capital expenditure program of $85 million per year for 2013 through 2015 will enable the company to complete water projects to meet consumer demand.

The Zacks Consensus Estimate for 2012 moved higher by 19.1% to $2.66 per share over the last 60 days, as all 5 estimates were raised. The Zacks Consensus Estimate for 2013 increased 1.98% to $2.71 per share over the same period, as all 7 estimates climbed up.

Other Stocks to Consider

Besides this company, a few other water utilities are also performing well and have a favorable Zacks Rank. The stocks worth considering are American Water Works Company Inc. ( AWK ) and Aqua America Inc. ( WTR ). Both currently have a short-term Zacks Rank #2 (Buy).

AMER WATER WORK (AWK): Free Stock Analysis Report

AMER STATES WTR (AWR): Free Stock Analysis Report

AQUA AMER INC (WTR): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AWK , AWR , WTR

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