Global Water Resources (GWRS) Acquires Eagletail Water

Global Water Resources, Inc. (NASDAQ:GWRS) has concluded the acquisition of Phoenix, AZ-based Eagletail Water Company. With this buyout, the company initiated its acquisition driven expansion strategy and more such acquisitions are anticipated in coming days.

This acquisition will help the Eagletail water service area customers to enjoy the benefits of wastewater services as the area previously lacked wastewater service facility. As per the reformed water policy, the Arizona Corporation Commission (ACC) approved the deal on an accelerated basis.

Consolidation – Need of the Hour

Consolidation is the need of the hour in the fragmented U.S. water utility space. The water infrastructure in U.S. has aged and needs repair and overhaul. However, it becomes very difficult for the small utility operators like Eagletail Water Company, to carry out expensive repairs and maintenance work.

So it comes down to bigger players like Global Water Resources to make necessary investment to upgrade as well as maintain the water and wastewater systems. Consequently, consolidation would drive the necessary infrastructure overhauls for the industry at large.

Global Water Resources has taken initial steps to expand operation through acquisitions, but there are some other water utilities as well which are looking to expand operation through inorganic route.

American Water Works (NYSE:AWK) is expected to add nearly 33,000 customers in 2017 through acquisitions out of which 13,000 customers have already been added in the first quarter of 2017.

Aqua America Inc. (NYSE:WTR) successfully completed a few acquisitions in the first quarter of 2017. Its pending acquisition will add another 8,600 customers to its existing base after it is completed over the course of the year.

Stock Performance

In the last 12 months, Global Water has outperformed the Zacks categorized Utility- Water Supply industry. During this period, the company’s shares rallied 27.3% compared with the industry’s gain of 12.2%.

Global Water Resources operates in a constructive regulatory environment that ensures necessary revisions in water rates. As the company generates the majority of earnings from regulated operations, a favorable regulatory climate is likely to continue boosting results.

Stock to Consider

Global Water Resources currently carries a Zacks Rank #4 (Sell). Instead investors can consider Pure Cycle Corporation (NASDAQ:PCYO) from the same space carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pure Cycle Corporation reported results that were in line with Zacks Consensus Estimate in second-quarter 2017. Its 2017 estimates remained unchanged but 2018 estimates moved up substantially from a loss of 2 cents to earnings of 9 cents in last 90 days.

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