American Water Works Company, Inc. (AWK), headquartered in Camden, New Jersey, engages in the business of water and wastewater services. Valued at $27.5 billion by market cap, it operates a vast infrastructure, including treatment plants, transmission mains, wells, pumping stations, and storage facilities.
Shares of this leading water management behemoth have struggled to keep up with the broader market over the past year. AWK has gained marginally over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 26.1%. In 2024, AWK stock is up 6.8%, while the SPX is up 16.5% on a YTD basis.
Narrowing the focus, AWK’s underperformance is also apparent compared to the Utilities Select Sector SPDR Fund (XLU). The exchange-traded fund has gained about 17.6% over the past year. The ETF’s 17.5% gains on a YTD basis outshine the stock’s single-digit losses over the same time frame.
American Water Works reported its Q2 earnings result on July 31, initially causing a marginal dip in its stock, which then rebounded with a gain of over 3% in the following two trading sessions. It reported a profit of $277 million, or $1.42 per share, missing Wall Street's expectation of $1.47. However, revenue for the quarter was $1.2 billion, surpassing the forecast of $1.1 billion. The company also narrowed its fiscal guidance and expects its earnings to be between $5.25 and $5.30 per share.
For the current fiscal year, ending in December, analysts expect AWK to report an EPS growth of 7.6% annually to $5.27 on a diluted basis. However, the company’s earnings surprise history is mixed. It beat the consensus estimate in two of the last four quarters, missing on two other occasions.
Among the 11 analysts covering AWK stock, the overall consensus is a “Moderate Buy.” That’s based on three “Strong Buy” ratings, one “Moderate Buy,” six “Holds,” and one “Strong Sell.”
This configuration has been consistent over the past months.
On Jul. 31, Wells Fargo & Company (WFC) analyst Jonathan Reeder downgraded American Water to “Underweight” from “Equal-Weight” but raised the price target to $138 from $127. This downgrade, reflecting the lowest return potential among five covered water utilities, is based on recent performance, regulatory changes, and macro conditions.
The mean price target of $141.67 represents a marginal premium to AWK’s current price levels. The Street-high price target of $159 suggests an upside potential of 12.8%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
