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American Water's (AWK) Unit to Buy Sundale Utilities for $2M

American Water Works Company Inc.AWK continues to expand its operations in the United States via acquisitions. The company announced that its subsidiary, Illinois American Water entered into an agreement to acquire Sundale Utilities, Inc.'s water and wastewater system for $2 million. This acquisition will increase American Water Works' wastewater and water customers by 1, 415 and 475, respectively.

The acquisition will allow Illinois American Water to provide better quality services to the existing customers of Sundale Utilities. Illinois American Water has plans to invest nearly $4.4 million in Sundale Utilities' service territories to replace and upgrade the water mains and meters. While wastewater services will be improved through the installation of a new aeration system, the company will sewer main lining and overall system rehab for reliability and safety.

Sundale Utilities decided to sell its systems to American Water Works' unit, as it needed substantial capital investments to upgrade and was unbale to do so on its own.

Expansion via Acquisitions

The company continues to widen its market footprint through strategic acquisitions. During the first four months of 2018, the company added 3,689 customers through five completed acquisitions and nearly 1,500 customers via organic initiatives. The company is already in discussion to acquire 15 more companies, which will add another 47,186 customers.

Recently, American Water Works' unit closed an agreement to acquire Alton's regional wastewater system for $53.8 million. This acquisition will increase American Water Works' customer volume by 23,000. (Read more: American Water's Unit to Buy Wastewater System for $53.8M )

Need for Consolidation

Consolidation is the need of the hour in the fragmented U.S. water utility space. The water utility infrastructure in the United States is getting old and needs ample investments, easier for bigger players to make. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.

Another water utility, Connecticut Water Service CTWS announced that it has entered into a definite agreement to merge with SJW Group SJW in an all-stock transaction. The combined company will become one of the largest water and wastewater service providers in the United States and serve more than 1.5 million customers in multiple states.

Price Movement

In a year's time, shares of American Water Works have outperformed its industry . The stock has gained 5.2% compared with the industry's rally of 3.7%.

Zacks Rank & a Key Pick

American Water Works has a Zacks Rank #3 (Hold). A better-ranked stock in the same space worth considering is Global Water Resources Inc. GWRS , carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Global Water Resources reported a positive earnings surprise of 100% in first-quarter 2018 and its long-term earnings growth is pegged at 15%. Its 2018 earnings estimates have moved up 21.4% in the past 60 days to 17 cents.

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Connecticut Water Service, Inc. (CTWS): Free Stock Analysis Report

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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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