American Water (AWK) AI Stock Analysis

• Market Cap: $28.05B
• Dividend Yield: 2.13%
• Average Volume (3M): 1.33M
• Price to Earnings (P/E): 26.2
• Beta (1Y): 0.14
• Revenue Growth: 11.79%
• EPS Growth: 11.69%
• Country: US
• Employees: 6,700
• Sector: Utilities
• Sector Strength: 82
• Industry: Regulated Water
• EPS (TTM): 1.05
• Shares Outstanding: 195,011,610
• 10 Day Avg. Volume: 1,644,420
• 30 Day Avg. Volume: 1,333,248
• PEG Ratio: 14.42
• Price to Book (P/B): 2.72
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -32.56
• Enterprise Value/Market Cap: 1.54
• Enterprise Value/Revenue: 2.35
• Enterprise Value/Gross Profit: 15.96
• Enterprise Value/Ebitda: 4.24
• 1Y Price Target: $144.20
• Price Target Upside: 1.66% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 10

• Rating: 75 Outperform
• Price Target: $162.00 ▲( 14.21% Upside)

American Water's solid financial performance and strategic earnings growth underpin its strength, despite high leverage and negative free cash flow risks. While technical indicators are neutral, the company's premium valuation and recent acquisition strategy support a positive long-term outlook. The earnings call and corporate events contribute to confidence in future growth, though careful cost management remains crucial.

Positive Factors

Acquisition Opportunities

The $315 million transaction with Nexus Water Group would significantly increase AWK's acquisition backlog, tripling it in the process.

Earnings Growth

AWK's investment outlook has several positive attributes including top quartile 8% EPS growth and constructive regulatory jurisdictions with no major rate cases until 4Q'25.

Regulatory Approval

AWK's acquisition of a municipal township was approved by the PA PUC 5-0 which may be a step in the right direction.

Negative Factors

Market Sentiment

Declining premiums and waning relative investor enthusiasm keep analysts awaiting meaningful catalysts.

Regulatory Challenges

There is potential regulatory pressure over the next few years, which could challenge sector valuations.

Valuation Concerns

The analyst maintains an Underperform rating on AWK primarily due to valuation, which is at a 35% premium compared to electric and gas peers.

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 displays solid financial performance with robust revenue and profit growth. The company's stable income statement metrics and strong ROE are commendable. However, high leverage and negative free cash flow due to significant capital investments pose a potential risk that requires careful monitoring. Overall, the financial health is strong, with some areas needing attention.

Income Statement

American Water has shown strong revenue growth of 13.71% from 2024 to TTM (Trailing-Twelve-Months), supported by solid gross and net profit margins of 56.18% and 22.24%, respectively. Consistent EBIT and EBITDA margins indicate good operational efficiency. The company's profitability metrics are robust, reflecting a stable and growing income stream.

Balance Sheet

The balance sheet reflects a stable equity base with an equity ratio of 31.77%. However, the debt-to-equity ratio is high at 1.38, indicating significant leverage. The return on equity (ROE) is strong at 10.16%, showcasing effective use of equity to generate profits despite the high leverage.

Cash Flow

Operating cash flow is strong, with a positive ratio of 1.86 to net income. However, the company has a negative free cash flow due to substantial capital expenditures, indicating high reinvestment in operations. The free cash flow to net income ratio is -0.82, highlighting the need for careful management of cash outflows.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
4.82B	4.68B	4.23B	3.79B	3.93B	3.78B
	Gross Profit
2.71B	2.83B	2.51B	2.20B	2.15B	2.15B
	EBIT
1.76B	1.72B	1.50B	1.27B	1.20B	1.25B
	EBITDA
2.71B	2.67B	2.36B	2.00B	1.91B	1.90B
	Net Income Common Stockholders
1.07B	1.05B	944.00M	820.00M	1.26B	709.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
114.00M	96.00M	330.00M	85.00M	116.00M	547.00M
	Total Assets
33.16B	33.85B	30.30B	27.79B	26.07B	24.77B
	Total Debt
14.51B	14.11B	12.44B	12.45B	11.06B	11.02B
	Net Debt
14.39B	14.01B	12.11B	12.37B	10.95B	10.47B
	Total Liabilities
22.62B	22.50B	20.50B	20.09B	18.78B	18.31B
	Stockholders Equity
10.53B	10.33B	9.80B	7.69B	7.30B	6.45B
Cash Flow		Free Cash Flow
-880.00M	-811.00M	-860.00M	-1.31B	-432.00M	-502.00M
	Operating Cash Flow
1.99B	2.04B	1.87B	1.11B	1.44B	1.43B
	Investing Cash Flow
-3.21B	-3.38B	-2.81B	-2.13B	-1.54B	-2.06B
	Financing Cash Flow
751.00M	1.11B	1.19B	1.00B	-345.00M	1.12B

American Water Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 141.85
• 50DMA: Negative
• 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 141.85 is below the 20-day moving average (MA) of 143.20, below the 50-day MA of 143.61, and above the 200-day MA of 136.01, indicating a neutral trend. The MACD of -0.52 indicates Positive momentum. The RSI at 48.07 is Neutral, neither overbought nor oversold. The STOCH value of 74.44 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	76 Outperform	$13.86B	7.65	28.57%	1.02%	26.64%	151.43%
AWK	75 Outperform	$28.05B	26.18	10.43%	2.13%	11.79%	11.69%
WTRG	75 Outperform	$10.81B	17.30	9.78%	3.30%	16.41%	5.65%
HTO	72 Outperform	$1.79B	17.55	7.49%	3.08%	12.34%	11.78%
AWR	67 Neutral	$3.01B	24.12	13.95%	2.33%	6.79%	5.96%
Sector *	63 Neutral	$8.47B	10.31	4.67%	4.37%	4.05%	-12.96%
CWT	63 Neutral	$2.86B	21.06	8.67%	2.40%	3.83%	-8.75%

American Water Corporate Events

Iowa Utilities Commission Approves Rate Increase for American Water

On May 21, 2025, the Iowa Utilities Commission approved a $12.7 million annualized increase in water and wastewater system revenues for Iowa American Water, following a rate case filed on May 1, 2024. This increase is driven by over $157 million in infrastructure investments aimed at upgrading treatment and distribution systems. Interim rates became effective on May 11, 2024, and the new rates will be finalized after the Iowa Utilities Commission reviews the company’s filing. This adjustment reflects Iowa American Water’s commitment to maintaining compliance with state and federal regulations while ensuring reliable services for its customers.

The most recent analyst rating on (AWK) stock is a Buy with a $164.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

American Water Announces Acquisition of Nexus Assets

On May 19, 2025, American Water Works Company, Inc. announced an agreement to acquire water and wastewater system assets from Nexus Regulated Utilities, LLC, a subsidiary of Nexus Water Group, Inc., for approximately $315 million. This acquisition, expected to close by August 2026, will expand American Water’s footprint by nearly 47,000 customer connections across eight states, enhancing its growth strategy and operational scale. The transaction requires regulatory approvals and is anticipated to support further growth opportunities and professional development for local employees.

The most recent analyst rating on (AWK) stock is a Buy with a $164.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

American Water Seeks Rate Adjustment in Kentucky

On May 14, 2025, American Water Works Company held its 2025 Annual Meeting of Shareholders, where eight directors were elected, executive compensation was approved, and PricewaterhouseCoopers LLP was ratified as the company’s independent public accounting firm. Additionally, Kentucky American Water, a subsidiary of American Water, filed a request with the Kentucky Public Service Commission on May 16, 2025, to adjust water rates, driven by over $212 million in capital investments. This request, aimed at maintaining infrastructure and service quality, could impact customer billing and is subject to regulatory approval.

The most recent analyst rating on (AWK) stock is a Buy with a $164.00 price target. To see the full list of analyst forecasts on American Water stock, see the AWK Stock Forecast page.

Missouri Approves Rate Increase for American Water

On May 7, 2025, the Missouri Public Service Commission approved a settlement for Missouri American Water‘s general rate case, resulting in a $63 million annualized revenue increase. This decision follows a $1.1 billion investment in infrastructure improvements. The new rates, effective by May 31, 2025, aim to maintain service quality while ensuring affordability for customers.

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.