Post Earnings Coverage as American Water Quarterly Revenue Grew 2.4%; EPS Advanced 3.6%

Upcoming AWS Coverage on Aqua America Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 10, 2017 / Active Wall St. announces its post-earnings coverage on American Water Works Co., Inc. (NYSE: AWK). The Company announced its fourth quarter and fiscal 2016 financial results on February 21, 2017. The water utility posted better-than-expected earnings. Register with us now for your free membership at:

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One of American Water Works’ competitors within the Water Utilities space, Aqua America, Inc. (NYSE: WTR), reported on February 22, 2017, its results for Q4 and year ended December 31, 2016. AWS will be initiating a research report on Aqua America in the coming days.

Today, AWS is promoting its earnings coverage on AWK; touching on WTR. Get our free coverage by signing up to:

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Consolidated Results

For the fourth quarter December 31, 2016, American Water recorded total revenue of $802 million, up 2.4% compared to total revenue of $783 million in Q4 2015; however, the Company’s revenue number lagged behind analysts’ consensus estimates of $810.8 million. For FY16, American water generated revenues of $3.30 billion. 4.5% higher than revenue of $3.16 billion in FY15.

In Q4 2016, American Water’s net income attributable to common stockholders increased $0.02 per diluted share to $0.57 per share compared to the prior year, and it also came in above analysts’ forecasts of $0.56 per share. The company’s net income from the Regulated Businesses was up $0.01 per diluted share with continued strong revenue growth partially offset by the timing of certain operation and maintenance (O&M) expenses. Net income from the Market-based Businesses was up $0.01 per diluted share primarily due to price redeterminations in the Military Services Group.

For FY16, GAAP income from continuing operations decreased $0.02 per diluted share compared to the prior year. Included in the 2016 amount was an after-tax charge of $39 million, or $0.22 per diluted share, related to the Settlement. Excluding the impact of the Settlement, net income was $2.84, up 7.6% primarily due to the Regulated Businesses from additional authorized revenue from investments, acquisitions and organic growth.

For FY16, American Water made capital investments of approximately $1.5 billion, the highest in Company’s history, including $1.3 billion to improve infrastructure in the Regulated Businesses to provide safe, clean and reliable service to its customers and over $199 million for regulated acquisitions. American Water also added approximately 42,000 customers through acquisitions, 13,000 through organic growth and have pending acquisitions representing another 40,000 customers.

Regulated Businesses

For Q4 2016, net income in American Water Works’ Regulated Businesses was $98 million compared to $96 million for Q4 2015. These results were driven by additional authorized revenue and surcharges to support infrastructure investments, acquisitions and organic growth. Partially offsetting increased revenue was higher O&M expense, largely due to timing of certain maintenance, repairs, and tank painting completed in the fourth quarter of 2016. The segment’s FY16 net income was $472 million compared to $473 million for the same period in 2015. Excluding the $39 million after-tax impact of the Settlement, adjusted net income for 2016 was $511 million, up $38 million from prior year. These results were primarily due to revenue growth of $128 million to support continued infrastructure investments to benefit customers, and acquisitions and organic growth, which was partially offset by higher depreciation expense from increased infrastructure investments.

For FY16, American Water Works received approximately $92 million in additional annualized authorized revenues from general rate cases, step increases, and infrastructure charges. The Company stated that it is awaiting final orders or proposed settlements for general rate cases in four states, requesting approximately $57 million in total additional revenues, $5 million step increases, and $10 million in infrastructure surcharges. The extent to which requested rate increases will be granted by the applicable regulatory agencies will vary.

For FY16, the segment’s adjusted O&M efficiency ratio improved to 34.9% compared to 35.9% for FY15. By reducing O&M expense as a proportion of revenue, American Water was able to make investments in needed capital improvements without significantly impacting customer bills.

Market-based Businesses

For Q4 2016, American Water Works’ net income from Market-based Businesses was $13 million compared to $11 million for Q4 2015. The Military Services Group was able to overcome previously discussed headwinds with price redeterminations and the 2016 addition of Vandenberg Air Force Base. For FY16, the segment’s net income was $39 million compared to $42 million for the same period in 2015. Although revenue at the Homeowner Services Group was higher by $11 million, it was more than offset by higher claims, marketing expenses, and costs associated with an investment in a new customer information system. Also, Keystone Clearwater results for the year were essentially earnings neutral, as anticipated.

Cash Flows

American Waters’ cash flows from operations grew 8.2% to $1.3 billion in FY16, driven by strong adjusted net income growth and higher working capital. The Company’s adjusted return on equity improved from 9.4% to 9.6%. As of December 31, 2016, American Water’s cash and cash equivalents were $75 million compared to $45 million as on December 31, 2015.

2017 Earnings Guidance

American Water affirmed its 2017 earnings guidance from continuing operations to be in the range of $2.98 – $3.08 per diluted share.

Stock Performance

On Thursday, March 09, 2017, the stock closed the trading session at $75.28, marginally falling 0.25% from its previous closing price of $75.47. A total volume of 557.48 thousand shares have exchanged hands. American Water Works’ stock price advanced 4.43% in the last month, 4.78% in the past three months, and 11.83% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 4.57%. The Company’s shares are trading at a PE ratio of 28.68 and have a dividend yield of 1.99%. At Thursday’s closing price, the stock’s net capitalization stands at $13.50 billion.

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