American Water Works Company, Inc.
) has been on an acquisition spree and the latest include the
purchase of Tri-States Utility, Inc. by its operating wing
Missouri American Water. The Tri-States Utility serves customers
in the south and southwest region of Branson, Mo.
AMER WATER WORK (AWK): Free Stock Analysis
CONN WATER SVC (CTWS): Free Stock Analysis
CONSOLTD WATER (CWCO): Free Stock Analysis
AQUA AMER INC (WTR): Free Stock Analysis
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American Water received regulatory approval from the Missouri
Public Service Commission (MoPSC) regarding the takeover on Aug
21, 2013 and the purchase deal was subsequently closed on Aug 30.
The acquisition will expand the company's customer base by
roughly 3,500, thereby amplifying its presence in the state of
Missouri. The company expects the current asset addition to boost
its water service quality. Earlier, American Water had
invested in the Branson area by acquiring assets of
Aqua America Inc.
) in 2011.
The Tri-States asset brings the overall acquisition count to
eight for American Water this year. The company very recently
purchased the City of Grafton water system in Illinois for $1.8
million, augmenting its customer base by 400.
The string of buyouts is a part of the company's long-term
growth-by-acquisition strategy. American Water has set aside a
capital investment goal of $0.8 billion to $1.0 billion per year.
These initiatives indicate the company's intention to gradually
expand its operational footprint across the U.S. and capture a
wide customer base, which will boost its sales potential.
We believe low-risk water utilities like American Water through
asset consolidations will be able to keep themselves well
positioned against more popular conventional utility operators.
In addition, its continued focus on rate-based investments in
terms of upgrading age-old infrastructure will bode well for its
future growth objectives. It is already progressing on the
installation work of its newly acquired water system of the City
American Water Works currently has a Zacks Rank #3 (Hold).
However, other water utilities that are worth considering include
Zacks Ranked #1 (Strong Buy)
Connecticut Water Service Inc.
) and Zacks Ranked #2 (Buy)
Consolidated Water Co. Ltd.