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Capital Investments to Drive Growth for American Water Works

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American Water Works’ financial performance

American Water Works’ (AWK) financial performance has improved in the last couple of quarters considering its increased capital investments. In the first quarter of 2016, its capital investments noticeably rose to $236 million, which expanded its geographical reach. Ultimately, the investments helped in expanding the company’s customer base. In 2016, the company is planning to spend $1.3 billion.

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Capital investments to drive performance

American Water Works’ capital spending plan in the next few years is to focus on basic infrastructure improvements. Its older pipelines have been denting its efficiency. Importantly, AWK’s capital investments focus on regulated businesses. The company generates nearly 50% of revenues from regulated operations in New Jersey and Pennsylvania.

American Water Works’ $6.4 billion capital spending plan in the next five years is expected to boost its EPS growth by 7%–10% annually through 2020. The acquisition of Scranton wastewater facilities is also expected to improve AWK’s earnings growth.

US water utilities (CGW) are increasingly experiencing revenue headwinds due to falling total water usage per customer. Equipment efficiency fosters the lower usage of water, which dents the sales of utilities. As a result, leading water utilities like American Water Works, Aqua America (WTR), and American States Water (AWR) are investing heavily in fortifying their infrastructure so as to improve operational efficiency.

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