PACIFIC GROVE, Calif. - The California Public Utilities Commission has approved California American Water (NYSE:AWK)'s acquisition of the Mesa del Sol water system, a move aimed at providing clean and reliable water to approximately 15 households in the Corral de Tierra area. This decision, announced today, will incorporate these new connections into the company's existing network of roughly 40,000 connections in Monterey County.
The Mesa del Sol water system, previously identified as failing by the California State Water Resources Control Board’s SAFER program, is set to benefit from California American Water's expertise. According to Evan Jacobs, Director of Business Development for California American Water, the integration will address longstanding water quality issues faced by the community.
The completion of the acquisition is anticipated in early 2025, following the construction of a physical interconnection and other system upgrades. Jacobs highlighted the advantages for Mesa del Sol residents, including improved economies of scale, rate stability, and access to the company's customer service options and programs.
California American Water, a subsidiary of American Water (NYSE: AWK), serves about 700,000 people with water and wastewater services. American Water, the largest regulated utility in the U.S., has operations in 14 states and on 18 military installations, and is known for its commitment to providing safe and affordable services to more than 14 million people nationwide.
This expansion aligns with California American Water's mission to deliver high-quality water services and demonstrates the company's continued growth within the state's regulated utility framework. The information is based on a press release statement.
In other recent news, American Water has been navigating through several significant developments. The company reported strong earnings in the first half of 2024, raising its yearly earnings per share guidance to $5.25-$5.30. Furthermore, the company's acquisition of Butler Area Sewer Authority's wastewater assets received approval from the Pennsylvania Commonwealth Court, propelling a $230 million deal forward.
Despite the potential for legal challenges, American Water is proceeding to finalize the transaction. Analysts at Jefferies have initiated a rating of Underperform for the company, citing concerns over earnings per share growth and balance sheet pressures.
Additionally, American Water has been dealing with a cybersecurity incident, but has taken steps to safeguard its systems and customer data. The utility's customer portal, MyWater, is now back online, and billing procedures have resumed. These recent developments highlight the company's commitment to maintaining operations while addressing various challenges.
InvestingPro Insights
As California American Water expands its operations through the acquisition of the Mesa del Sol water system, it's worth examining the financial health of its parent company, American Water Works (NYSE: AWK). According to InvestingPro data, AWK boasts a market capitalization of $27.6 billion, reflecting its significant presence in the water utility sector.
The company's commitment to shareholder value is evident in its dividend history. InvestingPro Tips reveal that AWK has raised its dividend for 10 consecutive years and has maintained dividend payments for 17 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 2.17%, may appeal to income-focused investors looking for stability in the utility sector.
AWK's financial performance shows promise, with a revenue growth of 7.68% over the last twelve months and an EBITDA growth of 7.7% during the same period. These figures suggest that the company's expansion strategies, like the Mesa del Sol acquisition, are contributing to its top-line growth.
However, investors should note that AWK is trading at a relatively high P/E ratio of 29, which an InvestingPro Tip flags as high relative to near-term earnings growth. This valuation metric suggests that the stock may be priced at a premium, possibly reflecting investor confidence in the company's long-term prospects and the defensive nature of water utility stocks.
For those interested in a deeper analysis, InvestingPro offers additional insights with 8 more tips available for AWK, providing a comprehensive view of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.