Last week, American Water Works Company, Inc.’s (NYSE:AWK) , Military Services Group received a contract for ownership, operation and maintenance of the water and wastewater systems at Wright-Patterson Air Force Base in Ohio. This contract is expected to generate revenues in excess of $490 million over the duration of the contract period of 50 years.
Expertise in Serving Defense Installation
Military Services Group of American Water Works has expertise in providing quality water and wastewater service to different defense installation across the United States. Prior to this deal, the company provided services to 12 military installations.
The contract will be subject to an annual economic price adjustment.
Another water utility, American States Water Company’s (NYSE:AWR) subsidiary, American States Utility Services, has 50-year contracts with 10 military bases. It is well equipped and experienced to win fresh awards from the military establishments.
High Quality Services
American Water Works has a research and development (R&D) program with 20 staff scientists. The company is also installing intelligent water grid aimed at improving the water quality and operational effectiveness in all areas of its business.
Consistent R&D is essential for providing high quality water to its residential and defense customers. Owing to high quality maintenance, the drinking water supplied by this water utility compares well with the national average.
Due to high quality of water and wastewater services, American Water Works has become a preferred choice for defense installation.
Investment to Upgrade Aging Infrastructure
The U.S. water infrastructure in quite old and massive investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.
American Water Works aims to invest $6.7-$7.3 billion from 2017 through 2021, which will help it boost earnings by 7-10% per year in the aforesaid period from the 2015 base. In the first half of 2017, the company invested $618 million, a majority chunk of which was invested to strengthen operation of its regulated business.
Water Utility Connecticut Water Service Inc. (NASDAQ:CTWS) aims to invest more than $150 million in the 2017-2019 period to strengthen its existing infrastructure. Aqua America Inc. (NYSE:WTR) has plans to make capital investments of more than $450 million in 2017 as part of an ambitious investment target of more than $1.2 billion in the 2017-2019 period.
Price Movement
Year to date, American Water Works’ stock has gained 13%, in line with the 13% rally of the industry.
The company is well poised to benefit from strategic acquisitions and regulated investments to strengthen the existing infrastructure, which, in turn, is expanding customer base and providing a boost to its top line.
Zacks Rank
American Water Works currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Connecticut Water Service, Inc. (CTWS): Free Stock Analysis Report
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American States Water Company (AWR): Free Stock Analysis Report
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