With a market cap of $26.9 billion, Camden, New Jersey-based American Water Works Company, Inc. (AWK) is a leading provider of water and wastewater services. It serves approximately 3.5 million customers across 14 states and operates extensive infrastructure, including treatment plants, pipelines, and storage facilities, to ensure efficient and reliable water management.
Shares of the water utility company have underperformed the broader market over the past 52 weeks. AWK stock has risen 4.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 31.1%. In 2024, shares of AWK are up 4.7%, compared to SPX's 24.1% gain on a YTD basis.
Looking closer, AWK has also lagged behind the Utilities Select Sector SPDR Fund's (XLU) 29.2% return over the past 52 weeks and a 27% YTD gain.
Despite reporting weaker-than-expected Q3 EPS of $1.80 on Oct. 30, shares of AWK recovered 1.8% the next day due to the company surpassing revenue expectations with $1.3 billion in total revenue, reflecting a 13.4% year-over-year increase. Investors were also encouraged by the company's strong long-term growth prospects, reaffirming its 7%-9% annual earnings and dividend growth outlook, alongside a robust capital expenditure plan. Additionally, AWK's continued expansion through acquisitions, adding 33,400 new customers, and its positive guidance for 2024 EPS between $5.25 and $5.30, helped boost investor confidence.
For the current fiscal year, ending in December, analysts expect AWK's EPS to grow 7.6% year-over-year to $5.27. The company's earnings surprise history is mixed. It beat the consensus estimates in one of the last four quarters while missing on three other occasions.
Among the 15 analysts covering the stock, the consensus rating is a “Hold.” That’s based on three “Strong Buy” ratings, one “Moderate Buy,” eight “Holds,” two “Moderate Sells,” and one “Strong Sell.”
This configuration is slightly less bullish than three months ago, with four “Strong Buy” ratings on the stock.
On Nov. 19, UBS analyst Gregg Orrill upgraded AWK to “Buy” with a price target of $155, citing confidence in the company's ability to sustain 8% earnings growth through 2028 despite upcoming challenges. The upgrade reflects American Water's strong balance sheet, a $1 billion capital plan increase, and growth potential highlighted during the Edison Electric conference.
As of writing, AWK is trading below the mean price target of $144.42. The Street-high price target of $164 implies a potential upside of 18.7%.
