A month has gone by since the last earnings report for American Water Works (AWK). Shares have added about 0.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is American Water Works due for a pullback? 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 drivers.

American Water Works Q3 Earnings Miss Estimates, Revenues Beat

American Water Works Company posted third-quarter 2024 operating earnings per share (EPS) of $1.80, which lagged the Zacks Consensus Estimate of $1.84 by 2.2%. The bottom line improved 8.4% from the year-ago quarter's $1.66.

The year-over-year improvement in earnings was due to increased revenues from the implementation of new rates in the Regulated Businesses from capital and acquisition investments.

Total Revenues of AWK

Total quarterly revenues of $1.32 billion surpassed the Zacks Consensus Estimate of $1.2 billion by 9.8%. The top line also increased 13.4% from the year-ago figure of $1.16 billion.

Highlights of AWK’s Q3 Release

Total operating expenses for the third quarter were $780 million, up 13.2% from the year-ago quarter’s $689 million, due to an increase in operating and maintenance expenses.

The operating income was $543 million, up 13.6% from the year-ago figure of $478 million. The metric was a tad higher than our model’s projection of $520 million.

AWK continues to expand operations through acquisitions and organic means. As of Sept.30, the company completed five acquisitions, which added 33,400 new customers to its existing customer base.

AWK’s 22 pending acquisitions (as of Oct. 30), when completed, will add another 43,400 customers.

Since Jan. 1, 2024, the company has been authorized annualized revenues of $256 million from rate increases. Further, a total of $90 million of additional annualized revenues from infrastructure charges have been authorized and are effective. Currently, the rate request pending amounts to $375 million.

Net income in third-quarter was $350 million compared with $323 million in the year-ago quarter.

AWK’s Segmental Details

Regulated businesses’ net incomes in third-quarter 2024 were $356 million, up 7.6% year over year.

Other net loss in third-quarter 2024 was $6 million, narrower than the previous-year quarter’s loss of $8 million.

Financial Highlights of AWK

Cash and cash equivalents amounted to $127 million as of Sept. 30, 2024, compared with $330 million as of Dec. 31, 2023. Total liquidity (including cash and credit) was $2.58 billion as of Sept. 30, which is enough to meet near-term obligations.

The total long-term debt was $12.55 billion as of Sept. 30, 2024, up 7.7% from $11.7 billion as of Dec. 31, 2023.

In the first nine months of 2024, cash flow from operating activities was $1.4 billion compared with $1.34 billion in the year-ago period.

AWK Stock’s Long-term Guidance

American Water reiterated its 2024 EPS guidance of $5.25-$5.30. The Zacks Consensus Estimate of $5.24 per share is a tad below of $5.27, the midpoint of the company’s guided range. AWK reiterated long-term earnings and dividend growth in the range of 7-9%. The company issued 2025 earnings per share guidance of $5.65 to $5.75.

The company plans to invest nearly $3.3 billion in 2025.

AWK announced its long-term capital expenditure plan to strengthen and expand its existing infrastructure. For 2025-2029 capital expenditure is expected in the range of $17-$18 billion and for 2025-3034 in the band of $40-$42 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, American Water Works has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 these revisions looks promising. Notably, American Water Works has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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