SJW Corp At 52-Week High On Q2 Results, Growth Drives

SJW Corp. (NYSE:SJW) touched a new 52-week high of $44.08 on Aug 25. The stock has delivered an impressive one-year return of about 54.8%, while the S&P 500 returned 9.3% over the same timeframe.

Over the past 52 weeks, SJW Corp.’s share price has ranged from a low of $27.60 to a high of $44.08. Average volume of shares traded over the last three months is approximately 79,787.

What’s Driving SJW Corp?

SJW Corp. reported second-quarter 2016 earnings of 66 cents per share, beating the Zacks Consensus Estimate by 60.98% and up 83.3% from the prior-year figure. Revenues in the reported quarter were $86.9 million, up 20% year over year. The new water rates drove the top-line results.

The company has reported a positive earnings surprise in two out of the last four quarters, resulting in an average positive surprise of 47.57%.

SJW Corp. offers excellent investment opportunity for investors due to its proven business model and a viable capital program, which drives rate base and earnings growth. The company is benefiting from a constructive regulatory environment, with mechanisms in place to provide protection for sales lost due to the ongoing drought and mandatory water conservation rules.

In June, the California Public Utilities Commission issued the final decision on the 2016 general rate case for San Jose Water Company, SJW Corp.’s wholly owned subsidiary. The final decision authorized rates that will add nearly $25.1 million or 8.6% to revenues in 2016.

Rate Hike a Must

Regulated water utilities heavily depend on rate hikes to recoup the investments made to improve the quality of services.

The recent rate hike for San Jose Water Company covered the authorization for a capital improvement program, worth nearly $318 million. Note that capital investments are essential for water utilities as they need to upgrade and strengthen their existing infrastructure to provide reliable service to their customers.

Recently, an American Water Works Company (NYSE:AWK) unit, Kentucky American Water, received approval from the Kentucky Public Service Commission for implementing new water and wastewater rates, effective Aug 28, 2016. (Read More:American Water Works Unit’s Proposal for New Rates Ok’d)

Zacks Rank & Key Picks

SJW Corp. currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the water utility space are Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE:SBS) and Veolia Environnement (PA:VIE) S.A. (OTC:VEOEY) . Both the stocks currently carry a Zacks Rank #2 (Buy).

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