Strong Buy on Connecticut Water - Analyst Blog


On Aug 15, Zacks Investment Research upgraded Connecticut Water Service Inc. ( CTWS ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Connecticut Water Service Inc. has witnessed rising earnings estimates after posting solid results in the second quarter 2013. This water utility has been delivering positive earnings surprises in 3 of the last 4 quarters with an average beat of 6.61%. The long-term earnings growth of the company is presently pegged at 5.00% on the back of sales growth of 11.43%.

During the second quarter, the company took the initiative to replace the dated main line in its service territories. Connecticut Water Service decided to replace the 3600 feet, 90 year old water main in Enfield and the 6000 feet, 100 year old main in Canton under its Water Infrastructure and Conservation Adjustment (WICA) program. This will not only enhance the reliability of its existing operations but also stop wastage. Since the inception of the WICA program in 2007, Connecticut Water Service has invested $52.5 million in the project.

The regulatory agreement with the Office of Consumer Counsel and the Attorney General of the State of Connecticut is expected to benefit both Connecticut Water Service and its customers.  The customers will have the benefit of a two-year rate reduction, effective Apr 1, 2014, and the company would benefit from the timely implementation of the revenue adjustment mechanism.

The financial flexibility and strong performance have enabled the company to pay regular dividends and increase the annual dividend rate in each of the last 44 years, indeed making the stock attractive. On Aug 15, the company raised its quarterly dividend rate by 2.1% to 24.75 cents from 24.25 cents. Another water utility American States Water Company ( AWR ) increased its quarterly dividend rate by 14.1% to 40.5 cents from 35.5 cents per share.

The Zacks Consensus Estimate for 2013 has risen 8.1% in the last 7 days to $1.47 per share, reflecting year-over-year growth of 12.68%. For 2014, the Zacks Consensus Estimate increased 7.7% in the past one week to $1.69, reflecting year-over-year growth of 5.63%.

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 SJW Corp. ( SJW ) and Consolidated Water Co. Ltd. ( CWCO ). Both these stocks currently have a short-term Zacks Rank #2 (Buy).

AMER STATES WTR (AWR): Free Stock Analysis Report

CONN WATER SVC (CTWS): Free Stock Analysis Report

CONSOLTD WATER (CWCO): Free Stock Analysis Report

SJW CORP (SJW): 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: AWR , CTWS , CWCO , SJW

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