American Water Works Co IncAWK

Morningstar Rating

Stock Research and Analysis

by Mark Barnett

American Water Works is the largest investor-owned water and wastewater utility in the United States. As such, the company enjoys some considerable advantages over its competitors in pursuing the investment opportunities presented by the dismal state Read more

Bulls Say

America's water infrastructure is old and poorly maintained; a 2007 EPA estimate put the cost of updating our community infrastructure at close to $335 billion for drinking water alone.

American Water's size should be a major advantage in pursuing new customers and acquisitions in the coming years, as tuck-ins to existing systems are a cheap source of growth.

Recent successes with nonregulated projects, such as the Tampa Bay desalination plant and Gillette Stadium's water reuse system, showcase American Water's expertise to prospective customers.

Regulatory lag is an issue, but American Water is partially protected by infrastructure surcharges, forward-looking test years, cost pass-throughs, and construction work in progress in some states. Read more

Bears Say

American Water's aggressive plans for infrastructure replacement and upgrades will probably run into public anger at rising rates for clean water that has traditionally been cheap.

Usage is in decline across American Water's territories, as conservation and higher rates for water are biting into demand.

Prolonged trouble in the credit markets would hamper American Water's growth expenditure program.

In periods of rising inflation, utilities are generally less attractive investments because they earn a set return on assets that can take time to adjust. Read more

Strategy

Because of agreements with regulators, American Water hadn't filed rate cases in many jurisdictions since its acquisition by RWE. Management is therefore pursuing new rate cases in multiple jurisdictions Read more

Management

American Water Works' senior management has a wealth of experience in dealing with regulation and in the water services industry in particular. President and CEO Donald Correll has more than 30 years of experience at water utilities, including 25 years Read more

Profile

Founded in 1886, American Water Works is the largest investor-owned U.S. water and wastewater utility; it operates in 31 states, the District of Columbia, and Ontario. It Read more

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