American Water Arm to Invest $2M in Water Services Upgrade

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American Water Works CompanyAWK announced that its subsidiary, Illinois American Water's Champaign County District, will invest $2 million in replacing the aging water mains and installing water main across the service area including Champaign, Urbana and Savoy.

The company aims at replacing 7,000 feet of old mains to increase its service reliability and improving the water flow for residential consumption. The company plans to substitute mains with upsized pipes from a 2-inch galvanized type to 6-inch and 8-inch ductile iron variety. Also, the company will be creating several loops within the distribution system to help ensure quality water service.

Upgrading and replacing the aging infrastructure is an ongoing work for this water utility. This investment is part of a multi-million project to improve and restore water lines in more than 100 communities in New Jersey. In June, the company announced an invested $2-million amount to revamp 6,300 feet of old mains in its Millburn service area. (Read more: American Water's Unit to Invest $2M for Replacing Old Mains )

Large Water Utilities are Pumping in More Funds

The U.S. water infrastructure is quite old and a massive investment is required to fix the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Facelift of old transmission mains and betterment of treatment plants require a hefty sum of money to enhance the water infrastructure. Large water utilities undertake strong long-term capital investment plans to upgrade the existing assets and also fortify the same that are added to the respective portfolio via acquisitions.

In the first half of 2018, American Water Works has chipped in nearly $1.1 billion with respect to the regulated capital investment coupled with the buyout of Pivotal Home Solution. Also, the company's full-year capex figure stands at $1.9-$2.1 billion for capital expenditures and consolidations. The company aims at pumping $8.4-$9 billion into the mending activity from 2018 through 2022, which will help drive the company's earnings by 7-10% in the said period from a 2016 base.

Another water utility, Aqua America WTR , intends to make capital investments in excess of $500 million in the ongoing year, which is integral to an ambitious investment target of more than $1.4 billion in the 2018-2020 time frame.

Also, Middlesex Water MSEX recently announced that it is all set to commence its water infrastructure upgrade in the Avenel section of Woodbridge Township, NJ. The company will invest $11.2 million in the renovation or replacement work of its weather-beaten water facilities. The company has an objective to invest nearly $267 million during 2018-2020 time period in installing and relocating water mains, service lines, wastewater collection system and setting up a new storage tank.

Price Movement

In a year's time, shares of American Water Works have gained 9.3% compared with the industry 's growth of 2.5%.

Zacks Rank & Key Pick

Currently, American Water Works has a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Ameren Corporation AEE , carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Ameren's long-term EPS is expected to grow 6.6%. The consensus estimate for 2018 bottom line has moved 5.6% north to $3.21 per share over the past 30 days.

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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 Nasdaq, Inc.

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

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