American Water Unit Acquires Water System In Alton District

American Water Works Company Inc. (NYSE:AWK) announced that its subsidiary, Illinois American Water, has completed the acquisition of Forest Homes-Maple Park Public Water District. The resident of Forest Homes-Maple Park Public Water District gave their approval on this transaction of Nov 3, 2016.

The acquisition has been approved by the Illinois Commerce Commission (ICC) for $900,000 on Jun 7, 2017. This buyout will increase American Water's customer count by nearly 500. The company provides water and wastewater services to nearly 15 million people in 47 U.S. states and Ontario, Canada.

Acquisition Driven Growth

American Water continues to expand its operation through systematic acquisition of water and wastewater systems. Last year, the company expanded its customer base by 42,000 through acquisition and aims to add another 40,000 users by a similar method in 2017. It has added nearly 16,700 customers to its existing base through acquisition and organic growth.

The previous acquisition was completed on Apr 3, 2017. American Water unit, New Jersey American Water, completed the buyout of Shorelands Water Company, which is a privately held water service provider in Monmouth County, NJ. It will increase American Water’s customer count by nearly 11,000 (read more: American Water Subsidiary Acquires Shorelands Water Company).

Water Industry Needs Consolidation

Consolidation is the need of the hour in the fragmented U.S. water utility space. The old infrastructure needs ample investments, which are easier for bigger players to make. Consolidation would, therefore, drive the necessary infrastructure overhauls for the industry at large.

American Water is not the only company in the Utility –Water Supply industry that is busy in expanding through inorganic route. Aqua America Inc. (NYSE:WTR) is equally active in expanding its market reach through acquisitions. In 2016, the company added 14,399 customers to its existing base through organic growth and strategic accretions. It expects to witness a 1.5–2% expansion in its customer base by 2017.

Connecticut Water Service Inc. (NASDAQ:CTWS) is another water utility to be pretty active in the acquisition front. Like some of its peers, the company has been engaged in strategic acquisitions of smaller water service providers. These continue to be a major part of the utility’s growth strategy. Since 2012, acquisitions have helped the company’s customer base expand 44%.

Price Movement

In the last six months, American Water's shares returned 8.3%, outperforming the Zacks categorized Utility-Water Supply industry’s increase of 8.0%.

The utility is well poised to benefit from regulated investments to strengthen existing infrastructure as well as strategic acquisition, which, in turn, is expanding customer base and providing a boost to the top line.

Zacks Rank

American Water currently carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same space is Consolidated Water Co. Ltd. (NASDAQ:CWCO) , having a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Consolidated Water reported average positive earnings surprise of 8.96% in the last four quarters. Its 2017 earnings estimates moved up 15.5% to 67 cents over the last 90 days.

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