SABESP's (SBS) Long-Term Prospects Bright: Time to Buy?

We issued an updated research report on Companhia de Saneamento Basico do Estado de Sao PauloSBS or SABESP on May 18. The company provides public water and sewage services in the state of Sao Paulo, Brazil, covering approximately 67% of the state's urban population. It currently has a market capitalization of approximately $5.8 billion.

Over the last one year, SABESP's American Depository Receipt (ADR) yielded 11.76% return, outperforming roughly 9.97% gain recorded by the Zacks categorized Utility Water Supply industry.

Presently, SABESP seems to be good pick for investors seeking exposure in the utility industry. The company served nearly 366 of total 645 municipalities in Sao Paulo exiting first-quarter 2017. It provided water and sewage services to roughly 24.8 million and 21.3 million customers, respectively.

SABESP's financial performance was quite impressive in the quarter, with earnings per ADR and revenues increasing 33.3% and 17.5% year over year, respectively. Billed water and sewage volumes grew 6% year over year. Of the total volume reported, roughly 56.2% represented water variation and about 43.8% came from sewage.

In the long run, SABESP seems well-positioned to benefit from higher demand for water and sewage services created by growth in the Brazilian population. By 2022, it aims to add nearly 1.0 million new water connections and 1.3 million new sewage connections. Also, it planned investments worth R$13.9 billion, including R$7,098 million in water, R$5,423 million in sewage collection and R$1,358 million in sewage treatment, for 2017−2021.

In the last seven days, the Zacks Consensus Estimate on SABESP increased 10.8% to $1.13 per ADR for 2017 and 11.6% to $1.25 per ADR for 2018.

Zacks Rank & Other Key Picks

The above-mentioned positives clearly justify SABESP's Zacks Rank #2 (Buy).

Other stocks worth considering in the utility industry include Veolia Environnement SA VEOEY , Pure Cycle Corporation PCYO and ONE Gas, Inc. OGS . While Veolia Environnement sports a Zacks Rank #1 (Strong Buy), both Pure Cycle and ONE Gas carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Veolia Environnement's earnings estimates for 2017 and 2018 were revised upward over the last 60 days.

Pure Cycle Corporation's average earnings surprise for the last two quarters was a positive 25%.

ONE Gas' financial performance in the last four quarters was impressive, with an average positive earnings surprise of 13.38%. Also, its earnings estimates for 2017 and 2018 were revised upward in the last 60 days.

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ONE Gas, Inc. (OGS): Free Stock Analysis Report

Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp (SBS): Free Stock Analysis Report

Veolia Environnement SA (VEOEY): Free Stock Analysis Report

Pure Cycle Corporation (PCYO): 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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