Pennsylvania American Water, a subsidiary of American Water (AWK, Financial), has successfully acquired more than $9.5 million from the Pennsylvania Infrastructure Investment Authority, commonly known as PENNVEST. This substantial financial package, aimed at enhancing water infrastructure, is composed of a $5.57 million grant coupled with a $3.96 million low-interest loan.
The allocated funds are designated for a pivotal project focused on replacing lead service lines in New Castle, located in Lawrence County. This initiative is set to involve the replacement of approximately 550 pipelines, enhancing the safety and reliability of the water supply in the region.
The terms of the financial aid include an attractive loan agreement set at a low-interest rate of 1% over a 20-year repayment period. This financial strategy not only underscores Pennsylvania American Water's commitment to infrastructural improvement but also reflects a significant investment in public health and safety.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 11 analysts, the average target price for American Water Works Co Inc (AWK, Financial) is $141.92 with a high estimate of $159.00 and a low estimate of $122.00. The average target implies an downside of 3.57% from the current price of $147.17. More detailed estimate data can be found on the American Water Works Co Inc (AWK) Forecast page.
Based on the consensus recommendation from 16 brokerage firms, American Water Works Co Inc's (AWK, Financial) average brokerage recommendation is currently 2.9, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for American Water Works Co Inc (AWK, Financial) in one year is $167.33, suggesting a upside of 13.7% from the current price of $147.17. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the American Water Works Co Inc (AWK) Summary page.
AWK Key Business Developments
Release Date: February 20, 2025
- Earnings Per Share (EPS): $5.39 for 2024, reflecting an 8% growth.
- Weather Impact on EPS: $0.12 per share favorable impact from drier than normal weather.
- Interest Income Impact on EPS: $0.09 per share from the HOS note.
- Capital Investment: Over $3 billion invested in 2024.
- Customer Growth: Nearly 70,000 new customer connections through acquisitions.
- Rate Cases: Seven rate cases completed in 2024, including significant cases in Illinois and California.
- Debt-to-Capital Ratio: 57% at the end of 2024.
- 2025 EPS Guidance: Affirmed at $5.65 to $5.75 per share, representing 8% growth.
- Long-term EPS Growth Target: 7% to 9% through 2029.
- Regulated Rate Base Growth: Expected at 8% to 9% long-term.
- Pipe Replacement: Approximately 400 miles of pipe replaced in 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American Water Works Co Inc (AWK, Financial) delivered 2024 financial results in line with expectations, achieving earnings of $5.39 per share, reflecting an 8% EPS growth.
- The company successfully completed several significant general rate cases in 2024, driven by necessary infrastructure investments, enhancing service reliability for over 14 million people.
- AWK invested over $3 billion in 2024, including acquisitions that added nearly 70,000 customer connections, meeting their 2% compounded annual growth target.
- The company affirmed its 2025 earnings guidance of $5.65 to $5.75 per share, expecting 8% EPS growth, and maintained a strong financial position with a debt-to-cap ratio of 57%.
- AWK's capital investment program is expected to grow the regulated rate base at a long-term rate of 8% to 9%, with a focus on customer affordability and infrastructure renewal.
Negative Points
- The company faces ongoing challenges with regulatory environments, as seen in California where a full decoupling mechanism was not recognized, prompting a motion for rehearing.
- Operating costs increased by $0.22 per share in 2024, driven by employee-related costs and production costs related to fuel, power, and chemicals.
- AWK's acquisition growth is described as 'lumpy,' with potential delays in closing processes affecting the consistency of customer growth through acquisitions.
- The company anticipates issuing $2.5 billion of external equity from 2025 to 2029, which could be dilutive and is subject to market conditions.
- Despite strong execution, AWK continues to face challenges related to declining water usage per customer, which could impact future revenue growth.
