Shattering the notion that utility stocks are boring, shares of American Water Works have surged 30% thus far in 2016. But don’t tell the company’s CEO Susan Story that it’s all hot money flooding into the stock that will leave just as quickly. ‘Water has a much lower risk profile for capital deployment,’ said Story. ‘Plus we have a low beta, 2% dividend yield and 7% earnings per share growth guidance so we have a good argument for our stock.’ Last week American Water Works reported second-quarter net income of $137 million, or 77 cents per share, on revenue of $827 million. The results beat Wall Street expectations of 72 cents per share. American Water Works expects full-year earnings in the range of $2.75 to $2.85 per share. The company said it plans to invest $1.4 billion to $1.5 billion across its footprint in 2016, with the majority to improve its water and wastewater systems. Included in this range for the full year 2016 are the acquisitions expected to close this year. All closed and pending acquisitions are expected to add approximately 55,400 new customers to the American Water footprint. Regulated acquisitions that closed during the first half of 2016 added approximately 7,600 water and wastewater customers. Pending acquisitions for water and wastewater systems are expected to add a total of approximately 47,800 customers. ‘98% of wastewater services are provided by municipalities and governments and they would rather let us buy the assets so they can focus on other services for their constituents,’ said Story. On the topic of safety, Story said the Flint Michigan drinking water tragedy put a spotlight on the lead issue. ‘We have always been in full compliance with federal lead rules and we continuously review our protocol for ensuring water safety,’ said Story. As for the country’s water supply being vulnerable to a terrorist attack, Story said water is regional and localized so it is safer in regard to a large event.’ ‘Our water treatment systems are separate from our internet so that makes us harder to hack,’ said Story.
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