American Water (AWK) Unit to Invest $0.5M to Replace Sewer Mains

American Water (NYSE:AWK) Works AWK has announced that its subsidiary, New Jersey American Water, is going to invest nearly $0.5 million for replacing more than 550 feet of aging sewer mains in Ocean City. The upgrades will include replacing 6-inch and 8-inch sewer lines installed in the 1900s with new, 8-inch plastic mains.

The replacement will increase the reliability of its services and boost sewer service. These upgrades are part of the company’s multimillion-dollar initiative to upgrade the existing old water and wastewater pipelines. New Jersey American Water, through its existing water and wastewater infrastructure, provides services to nearly 2.8 million in New Jersey.

American Water has been a frontrunner and is investing regularly to strengthen its water and wastewater infrastructure. The company has plans to invest $8.8-$9.4 billion between 2020 and 2024, and $20-$22 billion in the next decade.

Aging Infrastructure

The primary concern of the U.S. water and wastewater infrastructure is aging of the existing assets, which are gradually advancing toward the end of effective service life. As a consequence, thousands of main line breaks are occurring daily, which is resulting in the wastage of millions of gallons of potable water and increasing the chances of water contamination.

Investments Required to Upgrade

Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years. So, huge efforts are needed from private operators and funding is required from government agencies to upgrade and maintain the aging water, as well as wastewater facilities.

The large water utilities operating in the United States are making investments on a regular basis to upgrade and repair old pipelines. California Water Service (NYSE:CWT) CWT completed the Palos Verdes Peninsula Water Reliability Project that will support the existing 60-year-old drinking water pipeline and provide assistance to the system during natural disasters. The company aims to invest nearly $809.0-$828.0 million between 2019 and 2021 to strengthen its infrastructure. In addition to American Water, Essential Utilities (NYSE:WTRG) WTRG is making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest $2.8 billion in the 2020-2022 time period to rehabilitate and strengthen water and natural gas pipeline systems.

Price Performance

Shares of American Water have outperformed the industry in the past 12 months.

Zacks Rank & Key Pick

American Water Works currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Primo Water Corporation (NYSE:PRMW), which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Primo Water delivered a positive earnings surprise of 65%, on average, in the last four quarters. The Zacks Consensus Estimate for its 2020 earnings has moved 20.9% upward to 52 cents per share in the past 60 days.

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