American Water (AWK) AI Stock Analysis

• Market Cap: $27.76B
• Dividend Yield: 2.15%
• Average Volume (3M): 1.81M
• Price to Earnings (P/E): 26.4
• Beta (1Y): 0.23
• Revenue Growth: 10.63%
• EPS Growth: 10.38%
• Country: US
• Employees: 6,700
• Sector: Utilities
• Sector Strength: 95
• Industry: Regulated Water
• EPS (TTM): 5.39
• Shares Outstanding: 195,010,940
• 10 Day Avg. Volume: 1,908,313
• 30 Day Avg. Volume: 1,812,553
• PEG Ratio: 2.54
• Price to Book (P/B): N/A
• Price to Sales (P/S): 5.87
• Price to Cash Flow (P/CF): 10.80
• P/FCF Ratio: 10.80
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $139.88
• Price Target Upside: -0.70% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 9

American Water's strong revenue growth and profitability are tempered by high leverage and negative cash flow, while technical indicators suggest caution. Positive earnings call highlights reinforce stability amid operational challenges.

Positive Factors

Financial Stability

AWK has a strong balance sheet with a Baa1/A rating, which supports its growth potential.

Growth Potential

AWK's recent $1 billion increase in the capital plan gives increased confidence in delivering consistent 8% EPS and DPS growth through '28.

Operational Expansion

AWK closed on $417 million of acquisitions, adding 69,500 customer connections in multiple states.

Negative Factors

Investor Sentiment

The disproportionate equity raise is expected to receive pushback from investors.

Regulatory Challenges

Rising regulatory uncertainties, especially following setbacks in Pennsylvania, are impacting AWK's performance.

Valuation Concerns

AWK's 29% premium to the electric utility peer group implies unfavorable risk/reward at current levels.

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 makes money primarily through its regulated utility operations by providing water and wastewater services to residential, commercial, and industrial customers. The rates charged for these services are typically set and approved by state utility commissions, offering a stable and predictable revenue stream. Additionally, the company generates revenue from various market-based operations, which include providing water and wastewater services to military installations, municipalities, and other customers outside its regulated footprint. These services can include water main and sewer line protection programs, as well as other water-related services. American Water's revenue model is bolstered by strategic partnerships with government and private entities, expansion into new markets, and investments in infrastructure improvements to enhance service delivery and operational efficiency.

American Water Financial Statement Overview

Summary

American Water exhibits strong revenue growth and solid profitability. However, high leverage poses a risk, and negative free cash flow highlights the need for improved cash management.

Income Statement

American Water shows solid revenue growth with a recent increase from $4.23B to $4.68B, reflecting a growth rate of approximately 10.6%. The gross profit margin is strong at 60.3% for the latest annual period, indicating effective cost management. The net profit margin of 22.4% is robust, showing strong profitability. However, there is a slight decrease in EBITDA margin from prior years, currently at 34.7%, signaling rising operational costs.

Balance Sheet

The company's debt-to-equity ratio is relatively high at 1.37, which is typical for the industry but indicates significant leverage. The return on equity stands at 10.2%, which is reasonable, but there is potential for improvement. The equity ratio is relatively low at 34.9%, suggesting limited equity financing. Overall, the balance sheet reflects stability but with notable leverage risk.

Cash Flow

The operating cash flow to net income ratio is strong at 1.95, indicating efficient cash generation. However, free cash flow remains negative at -$811M, though showing slight improvement compared to the previous year. The company needs to enhance its cash flow position to support long-term investments and reduce financial risk.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
4.68B	4.23B	3.79B	3.93B	3.78B
	Gross Profit
2.83B	2.51B	2.20B	2.15B	2.15B
	EBIT
1.72B	1.50B	1.27B	1.20B	1.25B
	EBITDA
2.67B	2.36B	2.00B	1.91B	1.90B
	Net Income Common Stockholders
1.05B	944.00M	820.00M	1.26B	709.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
96.00M	330.00M	85.00M	116.00M	547.00M
	Total Assets
32.83B	30.30B	27.79B	26.07B	24.77B
	Total Debt
14.11B	12.44B	12.45B	11.06B	11.02B
	Net Debt
14.01B	12.11B	12.37B	10.95B	10.47B
	Total Liabilities
22.50B	20.50B	20.09B	18.78B	18.31B
	Stockholders Equity
10.33B	9.80B	7.69B	7.30B	6.45B
Cash Flow		Free Cash Flow
-811.00M	-860.00M	-1.31B	-432.00M	-502.00M
	Operating Cash Flow
2.04B	1.87B	1.11B	1.44B	1.43B
	Investing Cash Flow
-3.38B	-2.81B	-2.13B	-1.54B	-2.06B
	Financing Cash Flow
1.11B	1.19B	1.00B	-345.00M	1.12B

American Water Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 140.87
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AWK, the sentiment is Neutral. The current price of 140.87 is below the 20-day moving average (MA) of 143.73, above the 50-day MA of 135.96, and above the 200-day MA of 135.18, indicating a neutral trend. The MACD of 2.91 indicates Positive momentum. The RSI at 66.28 is Neutral, neither overbought nor oversold. The STOCH value of 77.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AWK.

American Water Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SBS	81 Outperform	$11.57B	6.58	28.81%	1.24%	41.72%	195.04%
SJW	79 Outperform	$1.75B	17.89	7.23%	3.16%	11.65%	6.78%
CWT	77 Outperform	$2.83B	14.60	12.46%	2.40%	30.48%	267.73%
AWK	74 Outperform	$27.76B	26.41	10.44%	2.15%	10.63%	10.38%
WTRG	71 Outperform	$10.90B	18.24	9.84%	3.35%	1.57%	16.50%
AWR	69 Neutral	$2.90B	23.81	14.01%	2.42%	-0.04%	-5.82%
Sector *	65 Neutral	$11.42B	15.20	6.23%	4.60%	5.50%	-9.06%

American Water Corporate Events

American Water Approves Severance for Executive VP

On February 28, 2025, American Water Works Company, Inc. approved a Severance Agreement for Melanie M. Kennedy, its Executive Vice President and Chief Human Resources Officer. The agreement includes a severance package with cash payments, prorated performance awards, and healthcare coverage, in exchange for her agreement to certain covenants, impacting the company’s executive management structure.

American Water Announces EVP Melanie Kennedy’s Departure

On February 22, 2025, American Water Works Company announced the separation of Melanie M. Kennedy, its Executive Vice President and Chief Human Resources Officer, effective March 1, 2025. The company acknowledged her contributions since joining in 2007 and this change aligns with the terms of their Executive Severance Policy.