Water Stocks To Watch For Earnings On Nov 2: AWK And AWR

The Q3 earnings season is in full swing with 291 of the S&P 500 Index members having already released results. Reported earnings were up 2.2% year over year on 1.3% higher revenues. This week too will see a string of earnings releases from more than 1000 companies (including 130 S&P members).

For the remaining index members, projections are of a 2.0% improvement in earnings on 1.4% higher revenues despite the expectations of a 65.4% plunge in earnings on 12.2% revenue deterioration for the energy space. Notably, this could be the first quarter to record positive earnings growth after five quarters of back-to-back declines.

Four out of the 16 sectors in the Zacks coverage universe are expected to witness an earnings decline this season. Read more details in our weekly Earnings Preview report.

Let us focus on water utilities, which need to make massive infrastructure investments for upgrading and maintaining their infrastructure, as old and soiled water pipelines are quickly nearing their effective service life. An Environment Protection Agency (EPA) report indicates that capital investment of $384.2 billion will be required for upgrading drinking water lines and $298.2 billion for wastewater lines.

Since the water industry is quite fragmented, consolidation is the need of the hour in the fragmented U.S. water utility space. The old water utility infrastructure needs ample investments, which are easier for bigger players to make. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.

In the third quarter of 2016, sector earnings are expected to be up 9.9% on 5.2% higher revenues. Keeping in mind the optimistic outlook, let’s take a look at a couple of water utilities that are scheduled to report earnings on Nov 2.

American Water Works Company, Inc. (NYSE:AWK) reported a positive earnings surprise of 6.94% in the previous quarter. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Water Works’ Earnings ESP, which represents the difference between the Most Accurate estimate of $1.02 and the Zacks Consensus Estimate of $1.00, is +2.00%. According to our proven model, stocks with the combination of a positive ESP and a Zacks Rank #1, #2 (Buy) or #3 have increased chances of beating estimates. (Read more: American Water Works Q3 Earnings: Stock to Beat?)

AMER WATER WORK Price and EPS Surprise

AMER WATER WORK Price and EPS Surprise | AMER WATER WORK Quote

American States Water Company (NYSE:AWR) reported a positive earnings surprise of 2.22% in the previous quarter. The company currently carries a Zacks Rank #3.

American States Water’s Earnings ESP, is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 57 cents.

AMER STATES WTR Price and EPS Surprise

AMER STATES WTR Price and EPS Surprise | AMER STATES WTR Quote

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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