American Water (AWK) AI Stock Analysis

• Market Cap: $26.17B
• Dividend Yield: 2.51%
• Average Volume (3M): 1.69M
• Price to Earnings (P/E): 23.5
• Beta (1Y): -0.27
• Revenue Growth: 12.29%
• EPS Growth: 13.13%
• Country: US
• Employees: 6,700
• Sector: Utilities
• Sector Strength: 65
• Industry: Regulated Water
• EPS (TTM): 1.22
• Shares Outstanding: 195,208,660
• 10 Day Avg. Volume: 2,045,834
• 30 Day Avg. Volume: 1,691,832
• PEG Ratio: 3.98
• Price to Book (P/B): 2.35
• Price to Sales (P/S): 4.95
• P/FCF Ratio: -23.85
• Enterprise Value/Market Cap: 1.60
• Enterprise Value/Revenue: 8.17
• Enterprise Value/Gross Profit: 18.86
• Enterprise Value/Ebitda: 15.15
• 1Y Price Target: $135.50
• Price Target Upside: 0.95% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 4
• EPS Forecast (FY): 6.1
• Revenue Forecast (FY): $5.43B

• Rating: 65 Neutral
• Price Target: $141.00 ▲(5.05% Upside)
• Action: Reiterated Date: 02/19/26
• Date: Action: Reiterated 02/19/26

AWK scores as moderate: strong regulated-utility earnings visibility and constructive guidance/M&A progress are balanced by weak free-cash-flow generation with continued reliance on external financing and elevated leverage. Technicals are mildly supportive but not in a clear long-term uptrend, and valuation looks only reasonable given the ~23x P/E despite the ~2.5% yield.

Positive Factors

Stable regulated revenue & margins

Consistent top-line and net income growth within a regulated framework provides durable earnings visibility. Regulated tariffs and authorized rate recoveries support steady margins and predictable cash flows versus competitive businesses, underpinning multi-year earnings and dividend targets despite capex needs.

Large, rate‑base investment program

Sizable, ongoing capital investment expands rate base that regulators typically allow recovery on, creating a durable earnings growth engine. Sustained pipe, treatment and PFAS remediation spending should support future authorized returns and long‑term EPS/dividend growth if regulatory outcomes remain constructive.

Strategic M&A and scale expansion

A robust acquisition pipeline and shareholder backing for merger activity drive incremental scale and rate‑base additions. Accretive tuck‑ins and larger strategic deals can lower unit operating costs, broaden regulated footprint, and strengthen competitive positioning in a fragmented municipal water market over the medium term.

Negative Factors

Elevated leverage

Leverage near the company’s stated <60% target constrains financial flexibility for further M&A or unexpected costs. Higher debt increases interest expense sensitivity and reliance on external financing, making credit metrics and access to capital key drivers of sustained investment and rating stability over the next several years.

Persistent negative free cash flow

Ongoing negative free cash flow despite improving operating cash highlights heavy capex and funding gaps. Reliance on external equity/debt to fund growth can pressure per‑share metrics and elevate dilution risk, while weaker cash conversion reduces buffers for rate timing mismatches or unexpected remediation costs.

Regulatory and timing uncertainty

Large, multi‑state rate cases and contingent PFAS remediation recoveries create timing and outcome risk that can delay or reduce expected revenue recovery. Protracted regulatory reviews and affordability scrutiny can materially affect cash flow timing, authorized returns and the pace of rate‑base reimbursement over multiple years.

American Water Business Overview & Revenue Model

Company Description

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States. It offers water and wastewater services to approximately 1,700 communities in 14 states serving approximately 3.4 million active customers. The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; industrial customers, such as large-scale manufacturers, mining, and production operations; public authorities comprising government buildings and other public sector facilities, such as schools and universities; and other utilities and community water and wastewater systems. It also provides water and wastewater services on various military installations; and undertakes contracts with municipal customers, primarily to operate and manage water and wastewater facilities, as well as offers other related services. In addition, the company operates approximately 80 surface water treatment plants; 480 groundwater treatment plants; 160 wastewater treatment plants; 52,500 miles of transmission, distribution, and collection mains and pipes; 1,100 groundwater wells; 1,700 water and wastewater pumping stations; 1,300 treated water storage facilities; and 76 dams. It serves approximately 14 million people with drinking water, wastewater, and other related services in 24 states. American Water Works Company, Inc. was founded in 1886 and is headquartered in Camden, New Jersey.

How the Company Makes Money

American Water generates revenue primarily through its Regulated Utilities segment, where it charges customers for water and wastewater services based on usage rates set by state regulatory agencies. The company also earns revenue from fixed fees and service charges. In its Market-Based Operations segment, American Water provides specialized services such as water system management and consulting for municipalities and industries, contributing additional revenue. The company benefits from significant partnerships with local governments and other entities, which often lead to long-term contracts and stable cash flows. Regulatory frameworks that allow for rate adjustments also play a critical role in maximizing revenue, as they enable the company to recover costs and provide returns to investors.

American Water Financial Statement Overview

Summary

Steady revenue and net income growth with resilient utility-level margins support the profile, but persistently negative free cash flow and a rising debt load (with leverage elevated for a regulated utility) meaningfully weaken financial flexibility and cash conversion quality.

Income Statement

Revenue shows a steady upward trajectory from 2022–2025 (with a dip in 2022), reaching $5.14B in 2025, and profitability remains strong for a regulated utility profile with gross margin consistently near ~58–61% and net margin around ~21–22% in 2022–2025. Net income has also grown from $820M (2022) to $1.11B (2025). Offsetting this, margin quality looks less consistent in the dataset (e.g., EBITDA margin swings sharply and 2025 EBIT margin appears missing/zero), which raises questions around earnings stability/normalization in the reported figures.

Balance Sheet

The balance sheet reflects a capital-intensive utility with elevated leverage: debt-to-equity sits around ~1.27–1.62 historically and is ~1.47 in 2025, while total debt has climbed to $15.9B (from $11.1B in 2020). Equity has grown to $10.8B, helping support the asset base, and return on equity is fairly steady around ~9.6–10.7% in 2022–2025. The key weakness is the continued debt build, which can pressure future flexibility as rates and funding needs fluctuate.

Cash Flow

Operating cash flow is positive and improving versus 2022 (about $2.06B in 2025 vs. $1.11B in 2022), which is supportive for a utility. However, free cash flow is persistently negative each year shown (including -$1.07B in 2025), indicating ongoing heavy investment and/or funding needs beyond internally generated cash. Cash generation relative to profits is also mixed, with operating cash flow covering less than half of net income in 2025 (per the provided coverage ratio), highlighting weaker near-term cash conversion despite solid accounting earnings.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.14B	4.68B	4.23B	3.79B	3.93B
Gross Profit	2.23B	2.83B	2.51B	2.20B	2.15B
EBITDA	2.77B	2.67B	2.36B	2.00B	1.91B
Net Income	1.11B	1.05B	944.00M	820.00M	1.26B
Balance Sheet
Total Assets	36.52B	32.83B	30.30B	27.79B	26.07B
Cash, Cash Equivalents and Short-Term Investments	174.00M	196.00M	330.00M	85.00M	116.00M
Total Debt	15.92B	14.11B	12.44B	12.45B	11.06B
Total Liabilities	25.69B	22.50B	20.50B	20.09B	18.78B
Stockholders Equity	10.84B	10.33B	9.80B	7.69B	7.30B
Cash Flow
Free Cash Flow	-1.07B	-811.00M	-860.00M	-1.31B	-432.00M
Operating Cash Flow	2.06B	2.04B	1.87B	1.11B	1.44B
Investing Cash Flow	-3.31B	-3.38B	-2.81B	-2.13B	-1.54B
Financing Cash Flow	1.25B	1.11B	1.19B	1.00B	-345.00M

American Water Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 134.22
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AWK, the sentiment is Positive. The current price of 134.22 is above the 20-day moving average (MA) of 128.22, above the 50-day MA of 129.35, and below the 200-day MA of 134.87, indicating a neutral trend. The MACD of 1.28 indicates Negative momentum. The RSI at 60.61 is Neutral, neither overbought nor oversold. The STOCH value of 89.86 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AWK.

American Water Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SBS	71 Outperform	$21.14B	16.99	16.98%	2.22%	-10.23%	-26.87%
MSEX	67 Neutral	$1.01B	23.12	9.09%	2.67%	6.24%	3.35%
WTRG	66 Neutral	$11.26B	16.49	10.29%	3.48%	21.35%	20.96%
Sector *	66 Neutral	$17.65B	18.10	5.60%	3.62%	6.62%	11.55%
AWK	65 Neutral	$26.17B	23.53	10.50%	2.51%	12.29%	13.13%
CWT	64 Neutral	$2.76B	20.27	8.19%	2.88%	-2.60%	-33.78%
AWR	62 Neutral	$2.89B	21.96	13.22%	2.64%	10.28%	13.56%

American Water Corporate Events

American Water Shareholders Approve Stock Issuance for Merger

On February 10, 2026, American Water held a special shareholder meeting at which about 82.6% of its outstanding shares were represented, and approximately 99% of votes cast backed the issuance of new common stock to facilitate its merger with Essential Utilities under their October 26, 2025 merger agreement. The same day, both companies reported that their shareholders overwhelmingly approved the merger-related proposals, clearing a key governance hurdle for a deal that would create a larger regulated utility player, though closing—targeted for the end of the first quarter of 2027—still depends on antitrust clearance under the Hart-Scott-Rodino Act and approvals from multiple public utility commissions, leaving regulatory outcomes as the main remaining risk for customers, employees and investors.

The most recent analyst rating on (AWK) stock is a Sell with a $122.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

American Water shareholders approve merger with Essential Utilities

On February 10, 2026, shareholders of American Water Works Company, Inc. and Essential Utilities, Inc. approved proposals tied to the planned merger of the two regulated water and wastewater utilities. The approvals, based on preliminary voting results at each company’s special shareholder meeting, clear a key governance hurdle for the transaction.

The merger, governed by an agreement signed on October 26, 2025, moves closer to completion with this shareholder backing, positioning the combined company to expand scale and potentially strengthen its standing in the U.S. regulated utilities sector. Final voting results from the American Water special meeting are expected to be disclosed in a forthcoming regulatory filing.

The most recent analyst rating on (AWK) stock is a Sell with a $122.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

American Water Seeks Illinois Rate Hike to Fund Upgrades

On January 27, 2026, Illinois American Water filed a request with the Illinois Commerce Commission to raise water and wastewater rates in two steps beginning in January 2027, aiming to generate roughly $134 million in additional annual revenue to support about $577 million in infrastructure investments planned from January 2026 through December 2027. The proposed increases, which must clear an 11‑month regulatory review, would fund replacement of 42 miles of aging mains and sewers, upgrades to storage tanks, wells, pumping stations, hydrants, meters and wastewater plants, and treatment improvements to meet regulatory requirements including emerging contaminants such as PFAS, with a typical residential customer using 3,500 gallons facing an estimated monthly bill increase of about $14 for water and $28 for wastewater; the filing also includes a discounted rate for the first 2,000 gallons to ease costs for low‑consumption customers and is accompanied by continued customer assistance programs, underscoring both the capital‑intensive nature of modernizing water infrastructure and the affordability pressures on ratepayers.

The most recent analyst rating on (AWK) stock is a Sell with a $122.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

American Water Seeks New Jersey Rate Hike for Upgrades

On January 16, 2026, New Jersey American Water filed a request with the New Jersey Board of Public Utilities to raise water and wastewater rates, seeking roughly $146 million in additional annual revenue to support more than $1.4 billion in infrastructure investments through December 2026, including replacing or rehabilitating nearly 120 miles of aging mains, ongoing lead service line replacement, and treatment upgrades to address emerging contaminants such as PFAS. If approved after a regulatory review that could take nine months or more, the typical residential water customer would see bills rise by about $10 per month and wastewater customers by $8 per month, while the filing also asks regulators to expand bill discounts for low-income customers who already receive energy assistance and to return savings from a Gross Receipts Tax refund to help offset costs, underscoring the company’s effort to balance large-scale system upgrades with affordability for ratepayers.

The most recent analyst rating on (AWK) stock is a Hold with a $139.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

Kentucky American Water wins approval for higher base rates

On December 16, 2025, the Kentucky Public Service Commission approved new base water rates for Kentucky American Water, granting an annualized revenue increase of about $18.2 million, driven primarily by more than $212 million in water treatment and distribution system capital investments made since the company’s last rate filing, and setting an authorized return on equity of 9.70% on a $667 million rate base. The decision folds the costs and investments from the terminated Qualified Infrastructure Program rider into base rates and will raise the average monthly residential bill for customers using 3,900 gallons by roughly $2, while the company highlights that the rate adjustment supports ongoing infrastructure upgrades, regulatory compliance and service reliability, alongside existing customer assistance programs for payment flexibility and aid to income-eligible households.

The most recent analyst rating on (AWK) stock is a Sell with a $122.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.