Are US Water Utilities Strong Investment Opportunities Right Now?


Nov. 20 2020, Updated 2:36 p.m. ET

Outlook of US water utilities

The rally in US water utilities in 2016 has been an unusual event that has formed a major portion of major utility companies’ total returns. But it seems challenging for these companies to continue such a performance going forward, especially in light of an impending interest rate hike. While water utility companies have been offering stable earnings and dividend growth over the years, their yields remain half that of US electric utilities.

American Water Works, however, seems relatively better placed among its water utility peers (CGW), particularly given its earnings and dividend growth. Regulatory policies and technological advancements are expected to be major drivers of water utilities for the next several years.

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Price targets

According to Wall Street analyst estimates, American Water Works (AWK) has a median price target of $83.20, as compared to its current market price of $75.53. This target implies an estimated upside of nearly 10% in one year.

Of the 18 analysts tracking American Water Works, seven analysts gave it a “buy” recommendation and ten analysts gave it a “hold” recommendation. Only one analyst has given it a “sell” recommendation as of August 16, 2016.

Aqua America (WTR) has the potential to rise by 13% during the next year. It has a target price of $35.30, as compared to its current price of $31.25.

By comparison, American States Water (AWR) has a price target of $41.67, as compared to its current market price of $40. This target implies a possible upside of nearly 4% in one year.

California Water (CWT) has a price target of $33.33 for the next one year, implying a gain of 8%. CWT was trading at $30.91 as of August 16, 2016.

Keep checking in with Market Realist’s Water Utilities page for ongoing industry updates.


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