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American Water Unit to Invest $1.5M for Replacing Old Mains

Zacks

American Water Works Company AWK announced that its subsidiary, New Jersey American Water will invest $1.5 million in 2017 to replace aging water mains in its Millburn service area.

The company aims to replace 2,200 feet of old mains to increase service reliability and improve water flow for residential consumption. It will replace old 24-inch water line with new 30-inch ductile iron pipe.

To provide uninterrupted supply of water during the replacement period, the company will erect a temporary above-ground water line, bypassing the section of the water main that is being replaced.

Maintenance Work

American Water Works, along with its subsidiaries, continues to strengthen the existing infrastructure. It is also replacing old and damaged pipelines, upgrading water treatment plants and rehabilitating the water storage facilities with the help of its units.

Earlier this month, New Jersey American Water announced that it will invest $2.7 million to replace 10,810 feet of aging water mains in its Ocean City service area. (Read more: American Water Unit to Invest $2.7M for Replacing Old Mains)

Aging Water Infrastructure

The U.S. water infrastructure in quite old and massive investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.

American Water Works aims to invest $6.7-$7.3 billion from 2017 through 2021, which will help it boost earnings by 7-10% per year in the aforesaid period from the 2015 base. In the first half of 2017, the company invested $618 million, a majority chunk of which was invested to strengthen operation of its regulated business.

Aqua America Inc. WTR, another utility, has plans to make capital investments of more than $450 million in 2017 as part of an ambitious investment target of more than $1.2 billion in the 2017-2019 period. Connecticut Water Service Inc. CTWS aims to invest more than $150 million in the 2017-2019 period to strengthen its existing infrastructure.

Price Movement

Year to date, American Water Works’ stock has gained 12.4%, outperforming the 12.2% rally of the industry



The company is well poised to benefit from strategic acquisitions and regulated investments to strengthen the existing infrastructure, which, in turn, is expanding customer base and providing a boost to its top line.

Zacks Rank

American Water Works currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stock to Consider

A better-ranked stock in the same space is SJW Corporation SJW currently carrying a Zacks Rank #2 (Buy).

SJW Corporation’s 2017 Zacks Consensus Estimate moved up 15.4% to $2.47 in the last 60 days. The company reported positive earnings surprises in three out of last four quarters with an average surprise of 23.9%.


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