American Water Works Company
AWK
announced that its subsidiary, Indiana American Water, has acquired water and wastewater system assets of River’s Edge, in southeast Indiana, for $0.42 million.
Indiana American Water, through this acquisition, will be providing water services to 100 new customers and wastewater services to 80 new customer connections. The acquisition will pave way for necessary investments to upgrade River’s Edge water and wastewater system. Customers will be able to enjoy high-quality services without experiencing an increase in rates.
Indiana American Water has successfully closed a few acquisitions and expanded the business in Indiana. This marks the third acquisition by the company in the past three years. It continues to provide high quality services to nearly 20% residents of Indiana.
Consolidation Essential for Water Space
Aging of water and wastewater assets along with fragmentation are primary concerns of the existing U.S. water and wastewater industry. Per the U.S. Environmental Protection Agency reports, more than 53,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers.
This highly fragmented industry creates operational challenges in meeting the essential requirement for upgrades and maintenance, as small service providers at times do not have the necessary financial strength to fund costly infrastructural upgrades. Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain, and expand drinking water as well as wastewater services to meet demand over the next 20 years.
Given the backdrop, large water utilities like American Water are quite active in making acquisitions to expand operations and make the necessary investments to upgrade the acquired property. From the start of the year till Aug 1, the company expanded the customer base by 11,200 through organic means and acquisitions. Its pending acquisitions (as of Aug 1), when completed, will add another 86,900 customers to the customer base. The company remains committed to expand the business through inorganic and organic ways.
Likewise, another water utility,
Essential Utilities
WTRG
has not only expanded water and wastewater operations through acquisitions but also ventured into the natural gas distribution business through the acquisition of Peoples. The company plans to invest $3 billion through 2023 to fortify water and natural gas operations as well as efficiently serve the expanding customer base.
Another water utility,
Global Water Resources, Inc.
GWRS
is taking the inorganic route to expand operations in the United States and making investments to upgrade infrastructure.
California Water Service
CWT
has decided to invest in the range of $270-$300 million in 2021 and expand operations through strategic acquisitions. In June, the company inked a deal to acquire the assets of HOH Utilities Company, thereby expanding the utility’s footprint in the island of Kauai.
Price Performance
Shares of American Water have outperformed the
industry
in the past 12 months.
Image Source: Zacks Investment Research
Zacks Rank
The company currently has a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report