It has been about a month since the last earnings report for American Water Works (AWK). Shares have lost about 3.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Water Works due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
American Water Works Q4 Earnings & Sales Beat Estimates
American Water Works Company posted fourth-quarter 2022 operating earnings per share (EPS) of 81 cents, which surpassed the Zacks Consensus Estimate of 76 cents by 6.6%. The bottom line declined 4.7% from the year-ago earnings of 85 cents per share.
Full-year earnings per share were $4.51 compared with $6.95 in 2021. Full-year 2022 earnings exceeded the guidance range of $4.39-$4.49 per share.
Total Revenues
Total revenues of $931 million surpassed the Zacks Consensus Estimate of $884 million by 5.3%. The top line declined 2.1% from the year-ago figure of $951 million.
2022 revenues were $3,792 million compared with $3,930 million in the year-ago period.
Segment Details
Regulated businesses’ revenues in 2022 were $3,505 million, up 3.6% from the year-ago quarter level. The year-over-year surge in revenues was primarily due to authorized revenue increases resulting from completed general rate cases and infrastructure proceedings to recover incremental capital and acquisition investments.
Other revenues in 2022 were $287 million compared with $546 million in the year-ago period. As a result of the sale of the Company’s Homeowner Services Group (“HOS”), the categories which were previously shown as “Market-Based Businesses” and “Other” have been combined and are now shown as Other.
Highlights of the Release
Total operating expenses for the fourth quarter were $670 million, down 8.3% from the year-ago quarter’s $731 million due to a decrease in operating and maintenance expenses.
The operating income was $261 million, up 18.6% from the year-ago figure of $220 million. The new rates (effective from Jan 1, 2022) should boost annual revenues by $416 million and the pending rate case, if approved without any change, would further increase the top line by $181 million.
American Water Works continues to expand operations through acquisitions and organic means. Through 26 closed acquisitions in seven states, it added 70,000 customers to its base. AWK’s 21 pending acquisitions (as of Dec 31), when completed, would add another 32,400 customers.
In 2022, American Water Works invested $2.6 billion in infrastructure improvements to provide quality services to its expanding customer base.
Financial Highlights
Cash and cash equivalents amounted to $85 million as of Dec 31, 2022, compared with $116 million as of Dec 31, 2021.
The total long-term debt was $10,926 million as of Dec 31, 2022, up 5.6% from $10,344 million as of Dec 31, 2021.
Guidance
American Water Works provided 2023 earnings guidance at $4.72-$4.82 per share. The Zacks Consensus Estimate for 2023 earnings of $4.78 per share is a tad higher than $4.77, the mid-point of the company’s guided range. AWK reiterated long-term earnings growth of 7-9%.
The company plans to invest nearly $2.9 billion across its footprint in 2023.
American Water Works has reiterated its target to invest in the range of $14-$15 billion in the 2023-2027 time period and $30-$34 billion for the 10-year period of 2023-2032.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 8.62% due to these changes.
VGM Scores
Currently, American Water Works has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, American Water Works has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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