Will the utility company American Water Works be able to exceed forecasts?

The utility company American Water Works Company Inc. (AWK), which deals with water supply and sanitation, intends to submit a report for the first quarter of this year in a week. Last quarter, the company could beat Wall Street forecasts.

Will she be able to do it again? American Water Works will present its first quarter report on Wednesday, April 27, after the market closes. Analysts’ forecasts suggest a slight decrease in revenue year-on-year (by about 0.2%) to $866 million. They expected earnings to grow by 2.7% to $0.75 per share. In the fourth quarter of 2021, the financial performance of American Water Works was better than forecasts.

Wall Street’s expectations may also be too conservative this quarter. But it’s worth considering the fact that in the fourth quarter earnings per share increased by over 300% because of the sale by American Water Works of its homeowner service business. Without this factor, earnings per share increased by 6.3% to $0.85 per share, which was roughly in line with analysts’ forecasts.

Should note that after the last stage of the sale of American Water Works and the withdrawal from some markets, the geography of the company is 14 states. Last quarter, American Water Works confirmed its previously published profit forecast for 2022 and long-term financial goals until 2026. In 2022, management expects earnings between $4.39 to $4.49 per share.

For the five-year period up to 2026, it projected cumulative annual earnings per share growth from 7% to 9%. The growth of dividends until 2026 will be between 7% to 10% on average. One of the most important performance indicators of American Water Works is the Operational and Maintenance Efficiency Coefficient (O&M). This ratio reflects how well a company controls costs in its regulated business. The lower the number, the better. In the fourth quarter, this ratio was 34.1%, compared with 34.3% a year earlier.