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Huge Upside Valuation Calls in Water Utilities (AWK, WTR, CWT, AWR)

Administrator — Wed, 16 Nov 2011 16:42:42 +0000

There remains substantial value, growth, and income opportunity in the water sector. This has been our take for some time, and a report out of Gabelli & Company this morning is further highlighting this. In fact, Gabelli’s “private market value” is far more aggressive than our own internal model and they have an implied upside of close to 30% to 50% higher on average if you look out to the end of 2013. Keep in mind that these are not exactly official price targets, but they are upside valuation calls under deal, restructuring, and other forms of valuation.

The water utilities covered by Gabelli were American Water Works Company, Inc. (NYSE: AWK), Aqua America Inc. (NYSE: WTR), California Water Service Group (NYSE: CWT), and American States Water Company (NYSE: AWR).

Gabelli’s research noted, “Water utility stocks and the S&P Composite are unchanged year-to-date, which compares to an 11% advance for the S&P Utilities Index… we believe the water and wastewater industry is ripe for new rounds of consolidation and privatization as the sector is in the early stages of an extended period of restructuring.”

American Water Works Company, Inc. (NYSE: AWK) currently trades at $30.80 and it remains our own personal favorite for water investors. We think this can go to the mid-$30′s or even get closer to $40 ultimately, but we are way short of Gabelli’s “private market value.” Thomson Reuters has a consensus price target of $34.00, but Gabelli’s “PMV” is all the way up at $44.00 for this year, $47.00 for 2012, and $49.00 for 2013. Cited are strong earnings growth, proposed water rate hikes, acquisitions, and asset changes.

Aqua America Inc. (NYSE: WTR) currently trades around $22.00 is also given high upside marks by Gabelli and its private market values are as follows: $27.00 for 2011, $28 for $2012, and $30 for 2013. This upside is based upon strong credit ratings and a low-risk business model which has both a cost-driven model and a growth oriented culture. Thomson Reuters has a consensus price target of about $24.60.

California Water Service Group (NYSE: CWT) trades around $18.80 and Gabelli calls it a high-quality water utility with a strong balance sheet (46% common equity) with an A+ investment-grade rating. Recent and pending rate relief were also cited as strengths. Gabelli’s private market value is $24.00 for 2011, $27.00 for 2012, and $28.00 for 2013. Thomson Reuters has a consensus price target of $21.00.

American States Water Company (NYSE: AWR) trades around $35.50 and Gabelli noted a strong balance sheet (53% common equity), an ‘A+’ investment-grade ratings, recent and pending rate activity, a 3.2% dividend, and privatization contracts. Gabelli gives a private market value rating as follows: $48.00 for 2011, $50.00 in 2012, and $53.00 in 2013. Thomson Reuters has a consensus price target of $38.34.

Again, these private market value ratings are not exact price targets. They are meant to show implied upside bands under certain situations. The Thomson Reuters consensus price targets are generally 10% above current share prices.

JON C. OGG

Filed under: Analyst Calls, Infrastructure, Utilities, Value Investing, Water Tagged: AWK, AWR, CWT, WTR

Top Analyst Upgrades & Downgrades (ALU, AWK, WTR, CHU, CYN, CBSH, FII, HFC, MTB, MCHP, PEGA, BOX, SEE, SU, TSO)

Administrator — Tue, 12 Jul 2011 12:34:40 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday morning.

Alcatel-Lucent (NYSE: ALU) Cut to Hold at Deutsche Bank.
American Water Works Co. (NYSE: AWK) Reiterated Buy at Gabelli.
Aqua America Inc (NYSE: WTR) Reiterated Buy at Gabelli.
China Unicom (NYSE: CHU) Cut to Neutral at Credit Suisse.
City National Corporation (NYSE: CYN) Raised to Neutral at BofA/ML.
Commerce Bancshares Inc. (NASDAQ: CBSH) Cut to Underperform at BofA/ML.
Federated Investors, Inc. (NYSE: FII) Cut to Underperform as Bear of the Day at Zacks.
HollyFrontier Corporation (NYSE: HFC) Cut to Neutral at BofA/ML; Started as Outperform at Oppenheimer.
M&T Bank Corp. (NYSE: MTB) Raised to Buy at BofA/ML.
Microchip Technology Inc. (NASDAQ: MCHP) Maintained Buy but cut target to $40 at Gleacher & Co.
Pegasystems Inc. (NASDAQ: PEGA) Cut to Hold at Canaccord Genuity.
SeaCube Container Leasing Limited (NYSE: BOX) reiterated Buy as Value at Zacks.
Sealed Air Corporation (NYSE: SEE) Raised to Overweight at Barclays.
Suncor Energy Inc. (NYSE: SU) named as Bull of the Day at Zacks.
Tesoro Corporation (NYSE: TSO) Cut to Underperform at BofA/ML.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: ALU, AWK, BOX, CBSH, CHU, CYN, FII, HFC, MCHP, MTB, PEGA, SEE, SU, TSO, WTR

The Best Water Stock for 2011 (WTR, AWK, AWR, CWT, LAYN, TTEK, WTS, PHO, PIO)

Administrator — Thu, 30 Dec 2010 19:10:50 +0000

Water is perhaps one of the most misunderstood and most under-invested themes for most investors looking for income and stability year after year. It is also exceedingly harder and harder to invest in due to consolidation and due to unforeseen risks that are present in the economy. Throughout the year we evaluate sectors and make our outlook picks. Water is one of those sectors and it should be a part of most long-term investment portfolios. Today marks the goal of picking the top water stock investment pick for 2011.

Looking through water investments is often a price-sensitive effort and investors rarely get to buy their favorite water stocks at big discounts. In utilities, our review for the top pick in 2011 focused on Aqua America Inc. (NYSE: WTR), American Water Works Company, Inc. (NYSE: AWK), American States Water Company (NYSE: AWR) and California Water Service Group (NYSE: CWT). We also went through the valuations and the outlook for Layne Christensen Company (NASDAQ: LAYN), Tetra Tech Inc. (NASDAQ: TTEK), and Watts Water Technologies, Inc. (NYSE: WTS). In the land of ETFs, there are the PowerShares Water Resources (NYSE: PHO) and the PowerShares Global Water (NYSE: PIO) depending upon your geographic focus.

There is a clear winner for 2011 and we followed it up with a “runner-up selection” as to which water stock is the best pick for investors in 2011. We have a basic table below for performance metrics and have added color with support for our top water pick for 2011.

Stock	Current	Mean Target	52-week Range
WTR	$22.78	$22.50	16.45 – 22.97
AWK	$25.30	$27.25	19.41 – 25.82
AWR	$35.01	$39.50	31.20 – 39.61
CWT	$37.94	$41.33	33.81 – 39.70
LAYN	$35.00	$35.40	22.97 – 36.92
TTEK	$25.67	$26.84	18.00 – 28.18
WTS	$37.09	$38.00	27.51 – 37.41

Filed under: Analyst Calls, Cult Stock, Editor's Picks, Value Investing, Water Tagged: AWK, AWR, CWT, LAYN, PHO, PIO, TTEK, WTR, WTS

The Dividend Changes Keep Coming (SBUX, COP, NLY, WTR, CSCO, AAPL)

Administrator — Wed, 24 Mar 2010 13:57:43 +0000

We are getting more and more dividend hikes in 2010. Starbucks Corp. (NASDAQ: SBUX) finally declared its first dividend. ConocoPhillips (NYSE: COP) is hiking its payout. Annaly Capital Management, Inc. (NYSE: NLY) is volatile, but it lowered its payout this week. Aqua America, Inc. (NYSE: WTR) promised more dividend growth ahead, and we wanted to assess the potential for a dividend from Cisco Systems, Inc. (NASDAQ: CSCO) and Apple Inc. (NASDAQ: AAPL).

Starbucks Corp. (NASDAQ: SBUX), as expected, is declaring its first dividend of $0.10 per quarter and said it would allocated 35% to 40% of net income for future dividends. It also authorized a buyback of 15 million shares.

ConocoPhillips (NYSE: COP) announced today, or at least confirmed today, that it was selling half of its Lukoil stake. It simultaneously is going to repurchase up to $5 billion in stock and hike its dividend to $0.55 per share per quarter from $0.50 per share per quarter.

Annaly Capital Management, Inc. (NYSE: NLY) announced earlier this week that its quarterly dividend would be $0.65 per share, which is actually a decrease of about 13% from its prior dividend of $0.75. This one has very sporadic and irregular dividend payouts due to its volatile income from mortgages as a REIT.

Aqua America, Inc. (NYSE: WTR) is one we are looking for more dividend growth after its CFO yesterday said, “In 2010, the trend of net income and dividend growth is expected to continue as the company continues to invest in infrastructure improvements and acquires more water and wastewater systems.”

Our big call for the year is Cisco Systems, Inc. (NASDAQ: CSCO). Our call has not changed here. CEO John Chambers has literally an arsenal of cash for this. The one we’d like to see a dividend from is Apple Inc. (NASDAQ: AAPL), but Steve Jobs already panned this notion recently.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Dividend, Stock Buybacks Tagged: AAPL, COP, CSCO, NLY, SBUX, WTR

Top Analyst Upgrades and Downgrades (WTR, EAT, BRCM, CLWR, DUK, FTO, HNSN, INFY, INTC, LVS, MELI, NVDA, TSO, WYNN, UNH, VLO)

247wallst — Mon, 04 Jan 2010 13:39:22 +0000

These are this Monday’s top analyst upgrades, downgrades, and initiations seen from Wall Street research calls:

Aqua America (NYSE: WTR) Cut to Neutral at Macquarie.
Brinker International (NYSE: EAT) Cut to Neutral at UBS.
Broadcom Corp (NASDAQ: BRCM) Raised to Outperform at Wells Fargo.
Clearwire Corp. (NASDAQ: CLWR) Raised to Outperform at Wells Fargo.
Duke Energy (NYSE: DUK) Cut to Underperform at Macquarie.
Frontier Oil (NYSE: FTO) Raised to Buy at Deutsche Bank.
Hansen Medical (NASDAQ: HNSN) Cut to Neutral at JPMorgan.
Infosys Technologies Ltd. (NASDAQ: INFY) Cut to Underperform at Wells Fargo.
Intel Corp. (NASDAQ: INTC) Raised to Outperform at Baird.
Las Vegas Sands (NYSE: LVS) Raised to Buy at UBS.
MercadoLibre (NASDAQ: MELI) Cut to at JPMorgan.
NVIDIA (NASDAQ: NVDA) Cut to Sell at Broadpoint AmTech.
Tesoro Corporation (NYSE: TSO) Raised to Buy at Deutsche Bank.
Wynn Resorts (NASDAQ: WYNN) Raised to Buy at UBS.
UnitedHealth (NYSE: UNH) Raised to Buy at Citigroup.
Valero Energy (NYSE: VLO) Raised to Hold at Deutsche Bank.

I would like to personally invite you to join in with the thousands of readers on our free daily email distribution list from 24/7 Wall St. to hear about ongoing day trader and options trader alerts, analyst upgrades and downgrades, stock and market rumors, Buffett and guru investor news, M&A and IPOs, and more.

JON C. OGG
January 4, 2010

Posted in Analyst Calls, Trading Alert Tagged: BRCM, CLWR, DUK, EAT, FTO, HNSN, INFY, INTC, LVS, MELI, NVDA, TSO, UNH, VLO, WTR, WYNN

Top 10 Analyst Upgrades & Downgrades (CROX, FTE, MMC, PCS, WTR, LEAP, NVO, RRGB, TI, TRI)

247wallst — Fri, 07 Aug 2009 12:00:28 +0000

Everyone is on hold for jobs data, but there are still pre-market research calls. These are the top ten analyst calls we saw for upgrades and downgrades this Friday morning:

Crocs (CROX) Raised to Overweight at Piper Jaffray.
France Telecom (FTE) Raised to Overweight at JPMorgan.
Marsh & McLennan (MMC) Raised to Buy at UBS.
MetroPCS (PCS) Raised to Hold at Auriga.
Aqua America (WTR) Cut to Neutral at HSBC.
Leap Wireless (LEAP) Cut to Market Weight at Thomas Weisel; Cut to Hold at Soleil.
Novo Nordisk (NVO) Cut to Neutral at Goldman Sachs; Cut to Neutral at JPMorgan; Cut to Neutral at UBS.
Red Robin Gourmet (RRGB) Cut to Perform at Oppenheimer.
Telecom Italia (TI) Cut to Neutral at BofA/Merrill Lynch.
Thomson Reuters (TRI) Cut to Underperform at Jefferies.

JON C. OGG

Posted in Analyst Calls Tagged: CROX, FTE, LEAP, MMC, NVO, PCS, RRGB, TI, TRI, WTR

Top Analyst Upgrades & Downgrades (WTR, DL, EHTH, GYMB, MEOH, SHW, STT)

247wallst — Tue, 19 May 2009 11:52:19 +0000

It is looking pretty thin in new great research calls from Wall Street today. Here are the top analyst calls seen as of 7:30 AM EST this Tuesday morning:

Aqua America (WTR) Raised to Buy at Janney Montgomery Scott.
China Distance Learning (DL) Cut to Perform at Oppenheimer.
eHealth (EHTH) Cut to Underperform at Oppenheimer.
Gymboree (GYMB) Raised to Positive at Susquehanna.
Methanex (MEOH) Cut to Sector Perform at CIBC.
Sherwin Williams (SHW) Raised to Overweight at JPMorgan.
State Street (STT) Raised to Top Pick at RBC.

JON C. OGG
May 19, 2009

Posted in Analyst Calls Tagged: DL, EHTH, GYMB, MEOH, SHW, STT, WTR

The ‘Safety Premium’ In Water Investing (AWK, WTR, AWR, CWT)

247wallst — Mon, 23 Mar 2009 15:35:33 +0000

We have been investigating several of the “safe sectors” for investing to identify which ones may have seen the worst or which ones could continue to have issues regardless of whether or not recent stock market strength holds up or not. Water is supposed to be one of those immune sectors as people have to drink water every day and just about every aspect of life revolves around water. So we are starting out with domestic water utilities, because this is the first line of defense in the water sector and the most defensive portion of the water sector. In theory, these do not require any new community growth or new water-intensive industries for the “defensive” thesis to hold up. We briefly wanted to review American Water Works Company, Inc. (NYSE: AWK), Aqua America Inc. (NYSE: WTR), American States Water Company (NYSE: AWR), and California Water Service Group (NYSE: CWT).

American Water Works Company, Inc. (NYSE: AWK) was one of 2008′s largest IPO’s, which was actually a Re-IPO after being acquired. It provides water and wastewater services to residential, commercial, and industrial customers (approximately 15 million) in 32 U.S. states and in Ontario, Canada. Currently, the company has a $2.9 billion market cap, and its $18.06 stock price gives it an implied forward P/E ratio of almost 14-times expected 2009 earnings. Its 52-week trading range is $16.22 to $23.65.

Aqua America Inc. (NYSE: WTR) operates regulated utilities which offer community-wide water or wastewater services for residential, commercial, and industrial customers in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, New York, Florida, Indiana, Virginia, Maine, Missouri, and South Carolina. The stock has recovered substantially off of its lows. It had roughly 3 million customers. The company has a $2.6 billion market cap, and with a $19.30 price it trades an an implied forward P/E ratio of 22.7 against 2009 expected earnings. Its 52-week trading range is $12.20 to $22.00.

American States Water Company (NYSE: AWR) offers water and electric service utility operations for residential and commercial customers. The difference is that this is not as geographically diverse and it serves many areas which have been hit by the woes of the declining real estate market on top of other issues. It also distributes electricity in 1 customer service area and 3 water service regions operating within 75 communities in 10 counties in California, as well as provides water service in 21 customer service areas with close to 250,000 water customers and about 23,000 electric customers in California, and it operated 2,724 miles of pipeline of water transmission and distribution systems; it also served 13,488 water-service customers in Arizona and operated 184 miles of pipeline of water transmission and distribution systems. The $650 million market cap based on a $37.53 stock price gives it an implied forward P/E ratio of 21.4 times expected 2009 earnings. Its 52-week trading range is $27.00 to $42.00.

California Water Service Group (NYSE: CWT) provides water utility and other related services in California, Washington, New Mexico, and Hawaii. California Water Service Group provides service to approximately 463,000 customers in 83 communities (2007 data). With a $42.80 stock price, this trades at an implied 20.8-times forward 2009 expected earnings. Its 52-week trading range is $27.68 to $48.28.

Where this gets interesting is that the bulk of these four trade much closer to their highs than to lows, with the exception of American Water Works. But it also trades at the largest discount to its forward 2009 earnings estimates. Part of the problem is that it is a recent IPO after the Germans sold it back to the US public markets. All of the other stocks in these four are expensive if you consider a mere forward-P/E ratio compared to the market today. That is because of the defensive nature of the stocks and probably also because of inherent regional monopolies they hold. Have you ever inquired to see if you could get a new water company of competitive quotes for water service? You can get a new water provider, if you move to a new market.

Again, this is just four of the companies we cover in the domestic utility side of the water sector equation. This is also one of the most defensive stock sectors for US investors. The sector never really gets “cheap” if you are just using P/E ratio comparative analysis. Traditionally, these might not rally as much as the markets if we go into a bull market mode. Again, that is “traditionally” and you will be surprised if you look at just how much these have recovered since the lows of October and November of 2008. We will be looking separately as filtration, infrastructure, and other services in different pieces this week.

Jon C. Ogg
March 23, 2009

Posted in Defensive Stocks, Water Tagged: AWK, AWR, CWT, WTR

Top Analyst Upgrades (AA, WTR, BEC, CWT, CHRT, CHA, GAS, NOK, PNY, WW)

247wallst — Thu, 19 Mar 2009 11:23:31 +0000

These are the top upgrades and positive research calls we have seen from Wall Street analysts so far early this Thursday morning:

Alcoa (AA) Raised to Overweight at JPMorgan.
Aqua America (WTR) Raised to Outperform at Baird.
Beckman Coulter (BEC) Raised to Overweight at Barclays.
California Water (CWT) Raised to Outperform at Baird.
Chartered Semiconductor (CHRT) Raised to Neutral at HSBC.
China Telecom (CHA) Raised to Overweight at Morgan Stanley.
Nicor (GAS) Raised to Outperform at Baird.
Nokia (NOK) Raised to Outperform at Credit Suisse.
Piedmont Natural Gas (PNY) Raised to Outperform at Baird.
Watson Wyatt Worldwide (WW) Started as Buy at SunTrust Robinson Humphrey.

-JON C. OGG

Posted in Analyst Calls Tagged: AA, BEC, CHA, CHRT, CWT, gas, NOK, PNY, WTR, WW

Water Profits Rise on Higher Rates (AWK, WTR)

247wallst — Thu, 06 Nov 2008 09:30:42 +0000

After the market closed yesterday, American Water Works (NYSE:AWK) reported third quarter EPS of $0.55 on revenues of $672 million. EPS was right on expectations, but revenues fell short by about 12%. The floods in the Midwest reduced water sales by 4.8% from the same period a year ago, reducing EPS by about 4%.

The company attributed the increase in earnings to "higher revenues inits Regulated Business," which contributed about 60% of net income.American Water’s president and CEO noted that the company continues "tomake progress in our regulatory filings." That’s the nub of the waterbusiness: convincing regulators to make customers pay more.

Aqua America (NYSE:WTR) reported very similar results for the very same reasons, so we’ll skip the details.

Investors weren’t impressed by American Water’s earnings. The stockprice fell more than 3% in after-hours trading. American Water’s shareprice is off about 18% from its 52-week high. Aqua America fared alittle better, rising nearly 2% after hours. But the stock is still offmore than 20% from 52-week highs.

Paul Ausick
November 6, 2008

Posted in Earnings, Utilities, Water Tagged: AWK, WTR