American Water Works Company, Inc. (AWK) | Investment Case

1. Company Snapshot

1.a. Company Description

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States.It offers water and wastewater services to approximately 1,700 communities in 14 states serving approximately 3.4 million active customers.The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; industrial customers, such as large-scale manufacturers, mining, and production operations; public authorities comprising government buildings and other public sector facilities, such as schools and universities; and other utilities and community water and wastewater systems.

It also provides water and wastewater services on various military installations; and undertakes contracts with municipal customers, primarily to operate and manage water and wastewater facilities, as well as offers other related services.In addition, the company operates approximately 80 surface water treatment plants; 480 groundwater treatment plants; 160 wastewater treatment plants; 52,500 miles of transmission, distribution, and collection mains and pipes; 1,100 groundwater wells; 1,700 water and wastewater pumping stations; 1,300 treated water storage facilities; and 76 dams.It serves approximately 14 million people with drinking water, wastewater, and other related services in 24 states.

American Water Works Company, Inc.was founded in 1886 and is headquartered in Camden, New Jersey.

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1.b. Last Insights on AWK

American Water Works Company's recent performance was driven by solid Q2 earnings, with revenues rising 11% due to rate hikes and acquisitions. The company's strong financial results were also attributed to its expanding customer base, with the acquisition of two new water and wastewater assets in Pennsylvania. Additionally, American Water's commitment to investing in its infrastructure and enhancing service in communities around the state has contributed to its growth. The company's ability to navigate regulatory requirements and expand its business through strategic acquisitions has also been a key driver of its success.

1.c. Company Highlights

Last Price	129.5
Change Percentage	0.44%
Open	128.38
Previous Close	128.93
Market Cap ( Millions)	25269
Volume	1568366
Year High	155.5
Year Low	118.74
M A 50	134.82
M A 200	140.25

FCF Yield	-3.87%
Dividend Yield	2.51%
ROE	10.48%
Debt / Equity	140.93%
Net Debt / EBIDTA	523.57%
Price To Book	2.32
Price Earnings Ratio	22.71
Price To FCF	-25.86
Price To sales	4.98
EV / EBITDA	13.94

2. American Water's Solid Q2 Performance Driven by Rate Increases and Acquisitions

American Water reported solid financial results for the second quarter and first half of 2025. Earnings were $1.48 per share for Q2, up from $1.42 in the same period last year, and $2.53 per share for the first six months, up from $2.37 per share. The company's revenue growth was driven by authorized rate increases and acquisitions, with CFO David Bowler highlighting the completion of rate cases in Missouri, Iowa, and Hawaii, and active cases in West Virginia, Kentucky, and California.

Publication Date: Aug -01

                                    📋 Highlights
                                    Earnings Growth:
                                                Q2 EPS increased to $1.48, H1 up to $2.53, with narrowed 2025 guidance of $5.70-$5.75.
Capital Investments:
                                                $1.3B invested year-to-date, on track for $3.3B goal, targeting 8-9% rate base growth.
Regulatory Progress:
                                                Completed cases in MO, IA, HI; active in WV, KY, CA, with CA's decoupling bill progressing.
Acquisitions and Expansion:
                                                Nexus adds 47k connections, 4 PA deals closed, 8 under agreement, with more expected.
Guidance Uptick:
                                                Raised due to strong usage, consistent execution, and a diversified platform, with stability expected into 2026.

                                

Financial Performance

The company's EPS of $1.48 was essentially in line with estimates of $1.49. American Water's long-term targets for both earnings and dividend growth remain at 7% to 9%, driven by 8% to 9% rate base growth. The company now expects to achieve the top half of its initial EPS guidance range for 2025, narrowed to $5.70 to $5.75 per share.

Capital Investments and Acquisitions

American Water invested $1.3 billion in capital projects year-to-date and announced several new acquisition agreements, including the Nexus Water Group systems, which will add nearly 47,000 customer connections. According to Cheryl Norton, the Nexus acquisition is a great opportunity to expand the company's footprint in existing states, and the deal does not differ significantly from typical municipal M&A pursued by the company.

Regulatory Environment

The company is hopeful that a decoupling bill in California will pass and be signed by the governor, potentially within a few months. The bill has passed out of the appropriations committee and needs to go to the full legislature before reaching the governor's desk.

Valuation

At current prices, American Water trades at a P/E ratio of 25.25, a P/B ratio of 2.56, and a dividend yield of 2.23%. The company's EV/EBITDA ratio is 16.92, and its free cash flow yield is -3.61%. With a ROIC of -108.55% and ROE of 10.34%, the company's valuation appears reasonable given its growth prospects.

Outlook

Analysts estimate next year's revenue growth at 6.4%, driven by consistent regulatory execution and the company's diversified platform. The company does not expect these drivers to change significantly in 2026, and its long-term growth targets remain intact.

3. NewsRoom

Old Man Winter Arrives Early: New Jersey American Water Urges Customers to Prepare Pipes and Conserve Water

Dec -04

Source: prnewswire.com

American Water Works' California Unit Prepares for Dry Months

Dec -04

Source: zacks.com

American Water Advises Customers to Prepare for Freezing Temperatures

Dec -04

Source: prnewswire.com

Missouri American Water Urges Customers to Prepare for Cold Weather

Dec -04

Source: prnewswire.com

California American Water President Addresses ASCE 2025 Report Card for California, Urges More Investment in Critical Water Infrastructure

Dec -03

Source: prnewswire.com

New Jersey American Water's Water UP! Graduates Ready to Keep the State's Water Workforce Flowing

Dec -03

Source: prnewswire.com

American Water Employees Contribute Nearly 3,000 Volunteer Hours During Companywide AmerICANs in Action! Month of Service

Dec -03

Source: prnewswire.com

American Water Selects United Way for the New York Stock Exchange's 2025 Global Giving Campaign

Dec -03

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.38%)

6. Segments

Regulated Businesses

Expected Growth: 7.4%

American Water Works Company's regulated water and wastewater services are expected to drive growth, driven by increasing demand for water infrastructure, rate increases, and acquisitions, as well as a strong track record of operational efficiency.

Other

Expected Growth: 7.2%

American Water Works Company's miscellaneous segment is driven by increasing demand for wastewater services, growing adoption of water conservation measures, and rising infrastructure investments, further propelled by the company's strategic acquisitions and partnerships.

7. Detailed Products

Water and Wastewater Services

American Water Works Company, Inc. provides water and wastewater services to residential, commercial, and industrial customers.

Water Infrastructure Management

The company offers management services for water and wastewater infrastructure, including operation, maintenance, and management of water treatment plants and distribution systems.

Water Conservation Services

American Water Works Company, Inc. provides water conservation services, including water audits, leak detection, and water-saving solutions.

Wastewater Treatment Services

The company offers wastewater treatment services, including design, construction, and operation of wastewater treatment plants.

Homeowner Services

American Water Works Company, Inc. provides homeowner services, including water and sewer line protection, and plumbing and drain cleaning services.

8. American Water Works Company, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for American Water Works Company, Inc. is low due to the lack of alternative sources of clean water for households and businesses.

Bargaining Power Of Customers

The bargaining power of customers for American Water Works Company, Inc. is medium due to the presence of a large customer base, but the company's monopoly in the water supply industry gives it an upper hand in negotiations.

Bargaining Power Of Suppliers

The bargaining power of suppliers for American Water Works Company, Inc. is low due to the company's large scale of operations and its ability to negotiate favorable prices with suppliers.

Threat Of New Entrants

The threat of new entrants for American Water Works Company, Inc. is low due to the high barriers to entry in the water supply industry, including the need for significant capital investment and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry for American Water Works Company, Inc. is medium due to the presence of a few large players in the water supply industry, but the company's strong brand and large customer base give it a competitive advantage.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	55.95%
Debt Cost	4.68%
Equity Weight	44.05%
Equity Cost	7.02%
WACC	5.71%
Leverage	127.00%

11. Quality Control: American Water Works Company, Inc. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

American Electric Power

A-Score: 6.9/10

Value: 5.7

Growth: 4.6

Quality: 6.8

Yield: 7.0

Momentum: 7.5

Volatility: 10.0

1-Year Total Return ->

Edison

A-Score: 6.4/10

Value: 8.3

Growth: 5.3

Quality: 7.5

Yield: 9.0

Momentum: 1.0

Volatility: 7.3

1-Year Total Return ->

Duke Energy

A-Score: 6.4/10

Value: 5.5

Growth: 4.7

Quality: 4.6

Yield: 7.0

Momentum: 6.5

Volatility: 10.0

1-Year Total Return ->

Sempra

A-Score: 5.8/10

Value: 4.8

Growth: 4.4

Quality: 4.5

Yield: 6.0

Momentum: 6.5

Volatility: 8.7

1-Year Total Return ->

PSEG

A-Score: 5.5/10

Value: 5.0

Growth: 3.8

Quality: 4.6

Yield: 6.0

Momentum: 3.5

Volatility: 10.0

1-Year Total Return ->

American Water Works

A-Score: 5.3/10

Value: 4.3

Growth: 5.0

Quality: 5.1

Yield: 4.0

Momentum: 4.0

Volatility: 9.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

28.86%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.71%

American Water Works Company, Inc. - US0304201033

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on AWK

1.c. Company Highlights

Expensive

Medium Volatility

Average Quality

Earnings Miss

Revenues Beats

Average Yield

Stable Momentum

Fairly Valued

Earnings Beats

Revenues Miss

2. American Water's Solid Q2 Performance Driven by Rate Increases and Acquisitions

Financial Performance

Capital Investments and Acquisitions

Regulatory Environment

Valuation

Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.38%)

6. Segments

Regulated Businesses

Expected Growth: 7.4%

Other

Expected Growth: 7.2%

7. Detailed Products

Water and Wastewater Services

Water Infrastructure Management

Water Conservation Services

Wastewater Treatment Services

Homeowner Services

8. American Water Works Company, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: American Water Works Company, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

129.5$

Current Price

129.5$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA