AWR

Overview of the Water Utility Industry: The Zacks Utility - Water Supply industry focuses on providing clean drinking water and wastewater services across the U.S., facing challenges like aging infrastructure and seasonal demand fluctuations. Companies are investing in upgrades to maintain service reliability.

Trends Influencing the Industry: Key trends include declining interest rates facilitating infrastructure investments, the need for consolidation among fragmented water systems to improve efficiency, and significant investment requirements to address deteriorating infrastructure, with the Bipartisan Infrastructure Law allocating $50 billion for improvements.

Current Industry Performance: The water supply industry has underperformed compared to the broader S&P 500 and utilities sector over the past year, trading at a discount relative to these benchmarks, despite a positive earnings outlook and a Zacks Industry Rank indicating bullish prospects.

Stocks to Watch: Notable companies in the sector include American Water Works Co., American States Water Co., and Essential Utilities Inc., each with plans for substantial infrastructure investments and varying growth potential, as indicated by their Zacks rankings.

Investment Potential: Edison International (EIX) is positioned as a strong investment option due to rising demand for clean electricity, systematic infrastructure investments, and a Zacks Rank #2 (Buy) rating, with a projected earnings growth rate of 10.93% over the long term.

Financial Performance: The Zacks Consensus Estimate for EIX's 2025 earnings per share has increased to $6.10, with revenues expected to grow by 4.90% to $18.46 billion, while the company has consistently paid dividends, yielding 5.76%.

Capital Investment Strategy: EIX is focusing on infrastructure development with significant capital expenditures, projecting $28-$29 billion in investments from 2025 to 2028, primarily for transmission, distribution, and generation capacity.

Comparative Analysis: EIX's return on equity (ROE) stands at 13.62%, outperforming the industry average, and while its shares have risen 6.9% over the past three months, they have slightly lagged behind the industry growth of 7%.

CPUC Approval: The California Public Utilities Commission approved a one-year deferral for American States Water Company's subsidiary, Golden State Water Company, to file its cost of capital application, postponing the deadline to May 1, 2027.

Current Rate of Return: Golden State Water Company's authorized rate of return on rate base remains at 7.93%, which includes a return on equity of 10.06% and an embedded cost of debt of 5.1%, effective through December 31, 2027.

Company Overview: American States Water Company serves over one million people across ten states, providing water and electric services through its subsidiaries, including Golden State Water Company and Bear Valley Electric Service, Inc.

Dividend History: AWR has consistently paid dividends since 1931, increasing them for 71 consecutive years, with a current policy aiming for a long-term compound annual growth rate of over 7% in dividends.