In a report released yesterday, Jonathan Reeder from Wells Fargo assigned a Sell rating on American States Water (AWR – Research Report), with a price target of $80.00.
Jonathan Reeder has given his Sell rating due to a combination of factors surrounding American States Water’s financial outlook and market performance. Despite a slight increase in his earnings per share (EPS) projection for the upcoming years, Reeder highlights that the company’s current share price appreciation is perplexing, as the recent quarterly update met, but did not exceed, expectations. The company’s premium price-to-earnings (P/E) ratio doesn’t appear justified to him without further growth, suggesting a limited total return potential compared to other companies in the water sector. This forms the basis of his cautious stance on the stock.
Reeder also notes that while the company is positioned to comply with new PFAS regulations, the associated capital expenditures are not factored into the upcoming General Rate Case (GRC). Furthermore, he believes that while potential legal liabilities related to PFAS may be mitigated in California, the financial impact of adherence to new regulations is a significant unknown. The anticipation of equity issuances to support capital projects could also dilute shareholder value. These factors contribute to Reeder’s perspective that the stock’s current valuation is not supported by its financial prospects and regulatory uncertainties, leading to his sell recommendation.
According to TipRanks, Reeder is a 3-star analyst with an average return of 3.9% and a 55.48% success rate. Reeder covers the Utilities sector, focusing on stocks such as American States Water, American Water, and Hawaiian Electric.
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American States Water (AWR) Company Description:
American States Water Co. operates as a holding company, which engages in the purchase, production, distribution, and sale of water. It operates through the following segments: Water, Electric, and Contracted Services. The company was founded on December 1, 1929 and is headquartered in San Dimas, CA.
