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American States Water's (AWR) Stable Capex, Customer Base a Boon

American States Water Company’s AWR systematic investments in strengthening its aging water infrastructure along with a sturdy utility customer base act as tailwinds. Also, consistent performance from its unit American States Utility Services (ASUS) benefits its operations.

The company has a trailing four-quarter earnings surprise of 0.30%, on average.

What’s Aiding the Stock?

After investing $123 million in 2020, the company expects to invest in the range of $120-$135 million in 2021 toward regulated utilities. Golden State Water Company (GSWC), a subsidiary of American States Water Company, filed a general rate case application for all water regions and at the general office for new rates for the years 2022, 2023 and 2024. The new application includes capital budget requests of $450.6 million for the above-mentioned three-year period. Also, the utility has a solid utility customer base and it is increasing its electricity and water utility customer base at a slow but steady pace through acquisitions and organic means.

American States Water Company’s Water segment is a major contributor to its total revenues. Notably, ASUS has long-term contracts with 11 military bases. In 2020, ASUS was also awarded with $15.5-MILLION new construction projects to be completed through the 2020-2021 time period. This unit is expected to contribute 45-49 cents per share to the company’s current-year earnings.

Headwinds

American States Water Company’s dependence on a single state for recognizing a significant chunk of its earnings is a huge downside. Also, the company operates in a highly regulated environment and any changes in the existing laws and conditions could affect its business.

Zacks Rank & Price Performance

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have lost 6.2% in the past three months compared with the industry’s fall of 8.6%.

Stocks to Consider

A few better-ranked utilities are Korea Electric Power Corporation KEP, National Grid Transco, PLC NGG and MDU Resources Group, Inc. MDU, all carrying a Zacks Rank #2 (Buy) at present.

Korea Electric Power, National Grid Transco and MDU Resources have a long-term (three-five years) earnings growth rate of 5%, 2.73% and 5%, respectively. The Zacks Consensus Estimate for 2021 earnings of both Korea Electric Power and MDU Resources has moved 5.1% north in the past 60 days. Also, the same for National Grid Transco’s fiscal 2021 earnings has been revised 4.1% upward in the past 60 days.

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Korea Electric Power Corporation (KEP): Free Stock Analysis Report
 
American States Water Company (AWR): Free Stock Analysis Report
 
National Grid Transco, PLC (NGG): Free Stock Analysis Report
 
MDU Resources Group, Inc. (MDU): Free Stock Analysis Report
 
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