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American Water Works (AWK)
NYSE:AWK
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American Water
(NYSE:AWK)74Outperform
Positive Factors
Growth Potential
AWK's recent $1 bln increase in the capital plan gives increased confidence in delivering consistent 8% EPS and DPS growth through '28.
M&A Activity
AWK's court victory regarding its $230 million BASA acquisition in Pennsylvania may improve its M&A outlook.
Negative Factors
Valuation Concerns
AWK still trades at 40% premium to the ’26 regulated utility group P/E despite approximately 9% relative share price underperformance recently.
American Water (AWK) vs. S&P 500 (SPY)
Market Cap
$27.14B
Dividend Yield2.19%
Average Volume (3M)1.48M
Price to Earnings (P/E)25.8
Beta (1Y)0.50
Revenue Growth10.63%
EPS Growth10.38%
CountryUS
Employees6,700
SectorUtilities
Sector Strength79
IndustryRegulated Utilities
Share Statistics
EPS (TTM)5.39
Shares Outstanding194,947,310
10 Day Avg. Volume1,803,104
30 Day Avg. Volume1,484,019
Financial Highlights & Ratios
PEG Ratio2.49
Price to Book (P/B)N/A
Price to Sales (P/S)5.81
Price to Cash Flow (P/CF)10.70
P/FCF Ratio10.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$131.88Price Target Upside-5.26% Downside
Rating ConsensusHold
Number of Analyst Covering9
American Water Business Overview & Revenue Model
Company DescriptionAmerican Water Works Company, Inc. engages in providing drinking water, wastewater, and other water-related services in the United States. The company provides safe, clean, affordable and reliable water services to residential, commercial and industrial customers.
How the Company Makes MoneyAmerican Water makes money primarily through its regulated utility operations by providing water and wastewater services to residential, commercial, and industrial customers. The rates charged for these services are typically set and approved by state utility commissions, offering a stable and predictable revenue stream. Additionally, the company generates revenue from various market-based operations, which include providing water and wastewater services to military installations, municipalities, and other customers outside its regulated footprint. These services can include water main and sewer line protection programs, as well as other water-related services. American Water's revenue model is bolstered by strategic partnerships with government and private entities, expansion into new markets, and investments in infrastructure improvements to enhance service delivery and operational efficiency.
American Water Financial Statement Overview
Summary
American Water demonstrates strong revenue growth and solid profitability. However, the high leverage and negative free cash flow indicate areas needing improvement. The financial health is stable but requires better cash flow and leverage management.Income Statement
American Water shows solid revenue growth with a recent increase from $4.23B to $4.68B, reflecting a growth rate of approximately 10.6%. The gross profit margin is strong at 60.3% for the latest annual period, indicating effective cost management. The net profit margin of 22.4% is robust, showing strong profitability. However, there is a slight decrease in EBITDA margin from prior years, currently at 34.7%, signaling rising operational costs.82
Very Positive
Balance Sheet
The company's debt-to-equity ratio is relatively high at 1.37, which is typical for the industry but indicates significant leverage. The return on equity stands at 10.2%, which is reasonable, but there is potential for improvement. The equity ratio is relatively low at 34.9%, suggesting limited equity financing. Overall, the balance sheet reflects stability but with notable leverage risk.75
Positive
Cash Flow
The operating cash flow to net income ratio is strong at 1.95, indicating efficient cash generation. However, free cash flow remains negative at -$811M, though showing slight improvement compared to the previous year. The company needs to enhance its cash flow position to support long-term investments and reduce financial risk.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.68B | 4.23B | 3.79B | 3.93B | 3.78B | Gross Profit |
| 2.83B | 2.51B | 2.20B | 2.15B | 2.15B | EBIT |
| 1.72B | 1.50B | 1.27B | 1.20B | 1.25B | EBITDA |
| 2.67B | 2.36B | 2.00B | 1.91B | 1.90B | Net Income Common Stockholders |
| 1.05B | 944.00M | 820.00M | 1.26B | 709.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 96.00M | 330.00M | 85.00M | 116.00M | 547.00M | Total Assets |
| 32.83B | 30.30B | 27.79B | 26.07B | 24.77B | Total Debt |
| 14.11B | 12.44B | 12.45B | 11.06B | 11.02B | Net Debt |
| 14.01B | 12.11B | 12.37B | 10.95B | 10.47B | Total Liabilities |
| 22.50B | 20.50B | 20.09B | 18.78B | 18.31B | Stockholders Equity |
| 10.33B | 9.80B | 7.69B | 7.30B | 6.45B |
| Cash Flow | Free Cash Flow | |||
| -811.00M | -860.00M | -1.31B | -432.00M | -502.00M | Operating Cash Flow |
| 2.04B | 1.87B | 1.11B | 1.44B | 1.43B | Investing Cash Flow |
| -3.38B | -2.81B | -2.13B | -1.54B | -2.06B | Financing Cash Flow |
| 1.11B | 1.19B | 1.00B | -345.00M | 1.12B |
American Water Technical Analysis
Positive
139.20
Price Trends
125.85
Positive
130.27
Positive
133.22
Positive
Market Momentum
3.56
Negative
71.22
Negative
87.14
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AWK, the sentiment is Positive. The current price of 139.2 is above the 20-day moving average (MA) of 129.42, above the 50-day MA of 125.85, and above the 200-day MA of 133.22, indicating a bullish trend. The MACD of 3.56 indicates Negative momentum. The RSI at 71.22 is Negative, neither overbought nor oversold. The STOCH value of 87.14 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AWK.
American Water Risk Analysis
American Water disclosed 40 risk factors in its most recent earnings report. American Water reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
American Water Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $1.83B | 19.00 | 6.87% | 2.98% | 11.65% | 6.78% | |
75 Outperform | $2.70B | 13.97 | 11.65% | 2.46% | 30.48% | 267.73% | |
74 Outperform | $27.14B | 25.83 | 10.44% | 2.19% | 10.63% | 10.38% | |
73 Outperform | $2.96B | 24.50 | 12.96% | 2.34% | -0.04% | -5.82% | |
71 Outperform | $10.65B | 17.86 | 9.60% | 3.28% | 1.57% | 16.50% | |
68 Neutral | $328.87M | 16.48 | 8.56% | 3.72% | 6.25% | 23.77% | |
65 Neutral | $12.05B | 15.92 | 6.71% | 4.32% | 8.04% | 3.76% |
* Utilities Sector Average
Performance Comparison
AWK
American Water
139.20
21.62
18.39%
AWR
American States Water
77.61
7.85
11.25%
WTRG
Essential Utilities
38.75
4.98
14.75%
ARTNA
Artesian Resources
32.07
-2.55
-7.37%
CWT
California Water Service
46.57
2.05
4.60%
SJW
SJW
54.47
-0.97
-1.75%
American Water Earnings Call Summary
Earnings Call Date: Feb 19, 2025 | % Change Since: 8.87% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected a generally positive sentiment with strong financial performance, successful rate cases, and significant capital investments. However, challenges such as increased operating costs and regulatory hurdles in California were noted.Highlights
Strong Financial Performance
American Water delivered 2024 financial results in line with expectations, achieving earnings of $5.39 per share, reflecting EPS growth of over 8%. The performance included $0.12 per share from favorable weather and $0.09 per share of incremental interest income from the HOS note.
Successful Rate Cases
The company successfully completed significant general rate cases in multiple states, including Illinois and California, resulting in revenue increases to support infrastructure investments.
Capital Investment and Acquisitions
American Water invested over $3 billion in 2024 for infrastructure improvements and closed on acquisitions adding nearly 70,000 customer connections, meeting the 2% compounded annual growth target.
Affirmation of 2025 Guidance
The company reaffirmed its 2025 earnings guidance of $5.65 to $5.75 per share, representing an expected 8% EPS growth, supported by a robust capital plan and regulatory strategy.
Strong Balance Sheet
American Water maintained a strong financial position with a debt to cap ratio below 60%, an A rating from S&P, and a stable outlook from Moody's.
Lowlights
Higher Operating Costs
Operating and maintenance expenses increased by $0.22 per share, driven mainly by employee-related costs and production costs linked to fuel, power, and chemicals.
Challenges in California Regulation
Despite positive outcomes, the California rate case decision did not fully recognize a decoupling mechanism, necessitating a motion for rehearing to ensure customer benefits.
Lumpiness in Acquisition Timelines
The company highlighted variability in acquisition timing, which can affect the consistency of customer growth year over year.
Company Guidance
During the American Water Fourth Quarter and Year End 2024 Conference Call, the company provided comprehensive guidance for the upcoming year and beyond. Earnings for 2024 were reported at $5.39 per share, showing an 8% growth, with $0.12 per share attributed to favorable weather and $0.09 per share from incremental interest income. Looking ahead, the company affirmed its 2025 earnings guidance of $5.65 to $5.75 per share, representing an expected 8% EPS growth. The long-term targets include 7% to 9% EPS and dividend growth, supported by an 8% to 9% rate base growth. American Water invested over $3 billion in 2024 and achieved nearly 70,000 customer connections, aligning with its 2% annual growth target. The company's financing plan projects $2.5 billion in external equity issuances from 2025 to 2029, with no equity planned for 2025. The solid financial position is further backed by a strong balance sheet, with a total debt to cap ratio at 57% and maintaining credit ratings of A at S&P and Baa1 at Moody's.American Water Corporate Events
Executive/Board Changes
American Water Approves Severance for Executive VP
Neutral
Feb 28, 2025
On February 28, 2025, American Water Works Company, Inc. approved a Severance Agreement for Melanie M. Kennedy, its Executive Vice President and Chief Human Resources Officer. The agreement includes a severance package with cash payments, prorated performance awards, and healthcare coverage, in exchange for her agreement to certain covenants, impacting the company’s executive management structure.
Executive/Board Changes
American Water Announces EVP Melanie Kennedy’s Departure
Neutral
Feb 24, 2025
On February 22, 2025, American Water Works Company announced the separation of Melanie M. Kennedy, its Executive Vice President and Chief Human Resources Officer, effective March 1, 2025. The company acknowledged her contributions since joining in 2007 and this change aligns with the terms of their Executive Severance Policy.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.