American Water Touches 52-Week High - Analyst Blog


On May 23, 2014, the shares of American Water Works Company, Inc. ( AWK ) touched a 52-week high of $47.69. The share price was finally closed at $47.61, up 0.7% from the previous day's closing. We believe that the company's steady investment in acquisition activities, infrastructure upgrade, strong cash generation capacity and payment of regular dividends have boosted the share price.

American Water Works continues to follow a systemic acquisition program. In the first three months of 2014, the company spent around $0.19 billion as capital expenditure. During first-quarter 2014, the company completed acquisitions of regulated water system and regulated water and wastewater facilities. On May 21, 2014, American Water Works' unit Kentucky American Water has inked an agreement to acquire the water and wastewater assets of the City of Millersburg, KY. The company plans to allocate $0.7 billion in the coming five years for acquisitions and strategic initiatives.

Apart from American Water Works, many of its peers like Consolidated Water Co. Ltd. ( CWCO ) and Connecticut Water Service Inc. ( CTWS ) previously pursued inorganic initiatives to expand their scale of operations.

In addition to pursuing steady acquisitions program, American Water Works is also investing substantially to upgrade its systems. Within the next five years, the company intends to spend a total of around $5.1 billion at its regulated operations, primarily to improve infrastructure. These initiatives will enable American Water Works to provide reliable services to its customers.

American Water Works continues to maintain a stable liquidity position. As of Mar 31, 2014, the company had cash balance of $30.8 million and available fund of around $1,209 million under the credit facility. In addition, the company had a strong cash generation capacity. In the first quarter, cash flow from operating activities jumped 63.7% to $244.9 million from $149.6 million in the year-ago comparable period. A favorable financial position enables American Water Works to pursue a steady expansion program.

American Water Works maintains a stable dividend payment history. In Apr 2014, the board of directors announced that the company will pay a quarterly dividend of 31 cents, up 10.7% from the previous payout. These initiatives will enable American Water Works retain investors' attention on the stock.

American Water Works currently has a Zacks Rank #2 (Buy). Another stock in the industry looking equally good is Aqua America Inc. ( WTR ), carrying a Zacks Rank #2 (Buy).

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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 , CTWS , CWCO , WTR

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