American Water Works Company Inc.
) posted strong results in the last four quarters, beating the
estimates in that process. Along with a recession-proof business
model and long-term expected earnings growth rate of 8.5%, this
Zacks #2 Rank (Buy) stock also offers a dividend yield of 2.7%,
making it attractive for the growth & income seekers.
Another Strong Quarter
American Water Works reported third quarter earnings per share of
86 cents on November 7, surpassing the Zacks Consensus Estimate of
82 cents by 4.9% and the year-ago earnings of 71 cents by 21.1%.
Revenues of $831.8 million were up 9.3% year over year from $760.9
million, and surpassed the Zacks Consensus Estimate of $826.0
million. Results were driven by favorable weather conditions and
business transformation initiatives undertaken by the company.
American Water Works' planned capital investment of $925 million in
2012 for the modernization of the water infrastructure will allow
it to serve its customers better in 2013.
Estimates Inch Higher
The Zacks Consensus Estimate increased by 0.5% to $2.19 per share
for 2012, in the last 60 days, as 6 out 13 estimates moved up. This
reflects an estimated year-over-year increase of 25.4%. For 2013,
the estimates increased by 0.9% to $2.21 per share, in the last 60
days, as 5 out 13 estimates moved up, and only one estimate moved
in the opposite direction.
The company is a consistent payer of dividend to its shareholders.
The annual dividend rate of $1.00 per share reflects a dividend
yield of 2.7% and is higher than the industry average of 1.9%. The
utility hiked its quarterly dividend payout by 8.7% to 25 cents in
May, marking the 4th dividend increase in as many years.
Shares of American Water Works Company currently trade at 16.89x
12-month forward earnings, an 8.8% discount to the peer group
average of 18.53x. Its price-to-book ratio of 1.47 is at a 16.9%
discount to the peer group average of 1.77.
The company has a trailing 12-month ROE of 8.9%, compared with the
peer group average of 10.7%. Even though ROE is lower than its
peers, we believe the steady performance of this company will allow
it to bridge the gap with its peers.
The hot and dry weather that prevailed during the first nine month
of the year benefited this water utility. The positive earnings
surprise also pulled the prices upward, with the shares gaining
19.4% over the past twelve months.
Voorhees, New Jersey-based American Water Works Company was founded
in 1886. This is the largest publicly traded regulated water and
wastewater utility holding company in the U.S., catering to
approximately 15 million residents across the country and parts of
With approximately 7,000 employees, the company's market
capitalization is $6.5 billion.
AMER WATER WORK (AWK): Free Stock Analysis
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