American Water Works AWK announced that its unit Indiana American Water (“INAW”) has received approval from the Indiana Utility Regulatory Commission for the acquisition of Silver Creek Water Corporation for $45 million.
This acquisition is expected to close in mid-November and add 8,000 water customers to INAW’s portfolio. Indiana American Water has been making strategic acquisitions to expand its operations and customer base. In 2023, INAW acquired Claypool Water System in Northern Indiana and Sunset Village Water System in Southeast Indiana. These acquisitions added 250 water customers to INAW’s existing customer base.
Consolidation in the Fragmented Water Industry
Per the American Society of Civil Engineers, nearly 50,000 community water systems and 16,000 wastewater treatment systems in the United States are providing water solutions to customers. Some of the service providers are too small and have limited financial strength to carry out essential and costly repairs on time, leading to pipeline breakage, disruption of services and increased possibility of contamination.
A substantial portion of the U.S. water and wastewater infrastructure is nearing the end of its effective service life. This should affect the 24x7 water supply. In order to ensure the extension of high-quality services to customers, investments are needed to upgrade the aging assets. For this, large water utility companies are acquiring small players and making necessary investments.
American Water continues to expand its operations in the United States through acquisitions. It also completed five acquisitions in the first half of 2024, adding nearly 33,400 new customers to its customer base. The company’s pending 22 acquisitions (as of June 30, 2024), when completed, will add another 59,000 customers.
Essential Utilities WTRG, a water utility, is pursuing water and wastewater acquisition opportunities in its service territories, totaling more than 400,000 customers. Management expects its customer base in the water segment to expand 2-3% through acquisitions and organic customer growth.
Another water utility California Water Service Group CWT targets strategic acquisitions in new markets with high-growth potential. In May 2024, CWT’s unit Cal Water acquired Kings Mountain Park Mutual Water Company’s water system assets. This year, CWT’s other subsidiaries, Hawaii Water and New Mexico Water, acquired the assets of HOH Utilities, LLC, and Monterey Water Company, respectively. The acquisition of HOH Utilities’ wastewater system assets added 1,800 residential, commercial and resort customers.
AWK’s Shares Outperform Industry
Shares of AWK have gained 21.4% in the past six months compared with the industry’s 17.9% growth.
Image Source: Zacks Investment Research
AWK’s Zacks Rank & Another Stock to Consider
AWK currently carries a Zacks Rank #2 (Buy). Another top-ranked stock in the space worth considering is American States Water AWR, carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American States Water’s long-term (three to five years) earnings growth is 6.3%. The Zacks Consensus Estimate for 2024 and 2025 earnings per share has moved up 0.7% and 1.5%, respectively, in the past 60 days. AWR reported an average earnings surprise of 3.43% in the past four quarters.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
See Stocks Now >>American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
American States Water Company (AWR) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
