An optimistic report for the third quarter was released in November 2020 by water supply specialist American Water Works Company Inc. (AWK). But the expectations for the sector are far bigger, and it’s already twice as fast as the yield of the S&P 500.
The earnings of American Water Works rose 9.8 percent to $1.46 per share in the third quarter, and the company increased its earnings outlook for 2020 to $3.87-$3.93.
AWK sells its water supply and wastewater treatment businesses in New York State, but is still the largest provider in the United States of these services. The water supply contracts for military bases, which can provide a steady cash flow, were a clear positive signal. In particular, in November, at the Lewis-McChord facility in Washington State, American Water Works announced a deal worth $771 million over 50 years for water supply. The organization now provides more than 425,000 people with water for military and civilian residential facilities including army personnel and their families, as well as United States Army civilian personnel.
This is just the start. In the future, American Water Works expects a rise in drinking water demand, which could ultimately become one of the most important items on Earth. Global warming is contributing to a rise in weather anomalies, and this is an important consideration for some business investors. Droughts cause water sources to become shallow, rising temperatures decrease glacial water inflows, and floods pollute the storage of artificial water and kill treatment facilities. Furthermore, water consumption rises sharply during periods of abnormal weather, including in agriculture.
Therefore there are no variables to minimize sales in the near future for American Water Works. Almost definitely, even the regulated part of the industry (with government-regulated tariffs) would be able to lift water prices.
Shares of American Water Works Company Inc. (AWK) closed the Tuesday session up 2.99% at $152.99.