AWK reported 25Q1 EPS of $1.05, up from $0.95 in 24Q1 and above my estimate of $0.98. Operating revenues rose 13.0% to $1.14 billion. Billed water service volumes were up 2.5% and estimated average prices increased 9.5%. Military and contract services revenues rose 12.0%. Consolidated operating and maintenance expenses rose 12.5%, with increases across all cost categories. Operating income increased 13.8% to $371 million. Net interest costs rose 22.0%. Net income increased 10.8% to $205 million.
Management reaffirmed its 2025 EPS guidance at $5.65-$5.75, including $0.10 of interest income from a seller note that AWK took back on the sale of its Homeowner Services business that matures in December 2026.
Based upon AWK’s 25Q1 financial performance, I have increased my 2025 EPS estimate by a penny to $5.75, which is at the top of management’s guidance range. For 2026, I now project EPS of $6.21, up from $6.15 in my previous report. The 2026 EPS represents an increase of 8.0%, which is in the middle of management’s long-term EPS growth target range of 7%-9%.
Since my last report on Apr. 9, AWK’s stock has a total return of 3.5%, underperforming the S&P 500, which is up 8.5%; but its performance is in line with the Dow Jones Water Utility Index’s 2.6% price rise. The stock has been a safe haven for most of the recent market turmoil. Yet, it has traded sideways since early March, reaching a 52-week intraday high of $154.57 in on April 4, but then making a lower low of $131.65 on May 14. The stock looks like it may be rolling over as the rest of the market has recovered.
Based upon the company’s financial performance and my projections, I am maintaining my price target of $152 for AWK’s stock. The price target implies a forward valuation multiple of 24.5 times projected 2026 EPS of $6.21, modestly above its current near-term forward multiple of 25.0 (based upon the consensus estimate) and above the peer group average of 22.2. Along with its 2.2% dividend yield, the potential total return is 8.6%. Accordingly, with the modest potential total return and the stock’s mediocre technicals, I am lowering my performance rating a notch to “3” (Neutral).
This is a summary of Lark Research’s recent report on American Water Works Company (AWK). To obtain a copy of the report, please reach out to Steve Percoco using the contact information provided below.
June 20, 2025 (Report published on June 1, 2025.)
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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