Aqua America Beats Q2 Earnings Estimates - Analyst Blog

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Aqua America Inc. ( WTR ) reported second-quarter 2013 pro forma earnings per share of 38 cents, beating the Zacks Consensus Estimate by 2 cents and year-ago level by 26.7%.

The improvement in earnings was primarily driven by positive impact from a number of factors, including operational competence, asset rebalancing strategy, benefits from the changes of the repair tax accounting procedure and upgrading infrastructure.


In the quarter under review, Aqua America's revenues were $195.7 million, missing the Zacks Consensus Estimate by $4.3 million. However, quarterly revenues increased 2.1% year over year.

Operational Update

Aqua America's total costs and expenses were $115 million, up 9.8% year over year due to a rise in operations and maintenance, depreciation and amortization expenses, and higher taxes (other than income taxes).

An increase in revenues was more than offset by higher total costs and expenses. In the reported quarter, operating margin declined to 41.2% from 45.4% in the year-ago quarter.

Aqua America's interest expenses totaled $19.2 million, down 1.5% year over year primarily due to a decline in long-term debt.

Financial Update

As of Jun 30, 2013, Aqua America's current assets were $221.6 million versus $261 million as of Dec 31, 2012.

Long-term debt as of Jun 30, 2013 was $1,489.8 million versus $1,544 million as of Dec 31, 2012.

During the first six months of 2013, Aqua America spent $134.9 million, which was funded from internal sources, under its capital investment program. The company utilized major portion of the fund to upgrade distribution networks and replace older pipes.

Dividend and Stock-split Update

The board of directors of Aqua America announced an increase of 9% quarter to quarter in its quarterly dividend to 19 cents. This new dividend will be payable on Sep 1, 2013 to shareholders of record at the close of business on Aug 16, 2013.

Further, the board also approved a 5-for-4 stock split, which will be effective from Sep 1, 2013.

The revised dividend will be applicable to the shares prior to the stock split. On the other hand, the stock split will be effective through a distribution of one share for each four shares outstanding as of Aug 16, 2013, on Sep 1, 2013.

Other Company Releases

SJW Corp. 's ( SJW ) second quarter 2013 operating earnings per share of 37 cents beat the Zacks Consensus Estimate by 9 cents.

California Water Service Group ( CWT ) announced second-quarter 2013 operating earnings of 28 cents per share, in line with the Zacks Consensus Estimate.

Middlesex Water Company ( MSEX ) reported second-quarter 2013 earnings per share of 28 cents, beating the Zacks Consensus Estimate by a penny.

Our View

It is evident from Aqua America's activities that the company is currently revamping its existing processes while expanding operations via inorganic route. In the first half of 2013, the company acquired eight water and wastewater utility systems. These acquisitions will allow Aqua America to further expand its operations.

On the divestiture front, Aqua America sold roughly two-thirds of its operations in Florida for $52.3 million in Mar 2013. The company is also in the middle of negotiations to sale its asset in Florida with a transaction value of $36.8 million. We consider these divestitures as a positive move; the company can utilize the net proceeds from these sales to profitable ventures.

In Jul 2013, Aqua America announced that its subsidiary in Texas plans to upgrade its water and sewer infrastructure, with an estimated investment of $17.1 million. This initiative will help the company to provide clean water to its customers.

In 2013, Aqua America has received rate awards and infrastructure surcharges in a number of states. These will encourage the company to invest more for the improvement of utility infrastructure.

Bryn Mawr, PA.-based Aqua America is a publicly traded water utility company. The company serves approximately 3 million residents in Florida, Georgia, Indiana, Illinois, New Jersey, North Carolina, Ohio, Pennsylvania, Texas and Virginia. Aqua America currently has a Zacks Rank #3 (Hold).

CALIF WATER SVC (CWT): Free Stock Analysis Report

MIDDLESEX WATER (MSEX): Free Stock Analysis Report

SJW CORP (SJW): Free Stock Analysis Report

AQUA AMER INC (WTR): 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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