American Water Unit Gets $5.1M Deal to Improve Sewer System

American Water Works AWK announced that its unit Contract Services Group has received a $5.1-million contract from the City of Camden to rehabilitate 28 combined sewer regulators. Through this sewer regulator project, American Water’s unit will engage in replacing, repairing, chamber cleaning and coating, and jetting of the adjoining sewer.

Proper maintenance of the sewer system will significantly lower the possibility of flooding experienced throughout the City of Camden. The selection of American Water’s unit for the sewer upgrade project is not surprising as the company has an expertise and knowledge of maintaining thousands of miles of water as well as wastewater pipelines that efficiently serves 15 million people across the United States.

Repair Essential for Aging Water Infrastructure

A major portion of the existing U.S. water and wastewater infrastructure is nearing the end of effective life. Aging of pipelines increases the possibility of breakage and results in the wastage of millions of gallons of potable water each year. The breakage of potable water pipelines also increases the chances of contamination. Per a finding from American Society of Civil Engineers, there are 240,000 water main breaks per year in the United States, resulting in the wastage of more than 2 trillion gallons of treated drinking water.

So, it is quite essential to make repairs and upgrade old and soiled water and wastewater mains to prevent wastage, as well as lower the possibility of potable water contamination. American Water is quite active in making regular investments in its service territories and maintaining the water mains. American Water has plans to invest $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade. These investments will allow it to maintain and expand its existing water infrastructure and provide reliable water services to the expanding customer base.

In addition to American Water, Essential Utilities WTRG is also making regular investments in water and wastewater systems. Its long-term plan is to invest $2.8 billion in the 2020-2022 time period to rehabilitate, and strengthen the existing water as well as natural gas pipeline systems. Similarly, California Water Service Group CWT aims to invest within $260-$290 million in 2020 for strengthening its existing water infrastructure.

Price Performance

Shares of American Water have outperformed the industry in the past 12 months.

Zacks Rank & Key Pick

Currently, the company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same industry is Consolidated Water Co. CWCO, currently holding a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2020 earnings per share has moved up 48.6% in the past 60 days to 55 cents. Long-term (three to five years) earnings growth for the company is currently projected at 8%.

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