Buy Rating Affirmed for American Water Works with Positive Outlook on Regulatory Approvals and Growth Potential

Mizuho Securities analyst Anthony Crowdell reiterated a Buy rating on American Water (AWK – Research Report) on May 8 and set a price target of $131.00.

Anthony Crowdell has given his Buy rating due to a combination of factors that indicate a positive outlook for American Water Works Co., Inc. (AWK). The recent recommendation by the Administrative Law Judge (ALJ) for a 9.55% return on equity (ROE) in the Pennsylvania water rate case is viewed as a constructive decision, easing much of the uncertainty surrounding the rate case outcome. This proposed decision is closer to the company’s request than the lower recommendations from commission staff and consumer advocates, positioning AWK favorably as the Public Utility Commission’s (PUC) final order approaches. Additionally, Crowdell notes that AWK has been outperforming the utility index and believes that there is further upside potential, given that the stock has historically traded at a substantial premium compared to the utility index.
Furthermore, the analyst acknowledges that while some pending acquisitions are not included in the revenue requirement, the overall sentiment remains positive. The PUC’s approval of AWK’s acquisition of Butler Sewer Authority (BASA), despite ongoing legal challenges, and the anticipation of a new framework for water utility acquisitions, could present future growth opportunities for AWK. These catalysts, alongside the expectation of a commission decision by July and the implementation of new rates by early August, contribute to the belief that American Water’s stock holds a promising investment prospect, warranting a Buy rating.

According to TipRanks, Crowdell is a 4-star analyst with an average return of 4.2% and a 64.84% success rate. Crowdell covers the Utilities sector, focusing on stocks such as American Water, Centerpoint Energy, and Dominion Energy.

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American Water (AWK) Company Description:

American Water Works Company, Inc. engages in providing drinking water, wastewater, and other water-related services in the United States. The company provides safe, clean, affordable and reliable water services to residential, commercial and industrial customers.