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Category: Stock Market and American States Water
Date: 5 November 2019 Stock Price: $90.95 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of American States Water Company, serving over 1 million people across nine states
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About American States Water Company
American States Water Company is the parent of Golden State Water Company and American States Utility Services, Inc., serving over one million people in nine states. Through its utility subsidiary, Golden State Water Company, the company provides water service to approximately 260,000 customer connections located within more than 80 communities in Northern, Coastal and Southern California. The company also distributes electricity to approximately 24,000 customer connections in the City of Big Bear Lake and surrounding areas in San Bernardino County, California. Through its contracted services subsidiary, American States Utility Services, Inc., the company provides operations, maintenance and construction management services for water distribution and wastewater collection and treatment facilities located on military bases throughout the country under 50-year privatization contracts with the U.S. government.
American States Water Company has paid dividends to shareholders every year since 1931, increasing the dividends received by shareholders each calendar year for 64 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.
American States Water Company has paid dividends to shareholders every year since 1931, increasing the dividends received by shareholders each calendar year for 64 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.
Financial overview of American States Water's 3rd quarter 2019 earnings results
The data below refers to the latest quarter's data (unless specified otherwise)
- Net revenues: $134.496 million (down from $124.128 million for the same quarter of the previous year)
- Net revenues increased by 8.35% over the last 12 months
- Operating expenses: $91.772 million (up from $90.207 million for the same quarter of the previous year)
- Operating expenses increased by 1.7% over the last 12 months
- Net income: $28.006 million (up from $22.952 million for the same quarter of the previous year)
- Diluted earnings per share: $0.76 (up from $0.62 for the same quarter of the previous year)
- PE ratio of American States Water Co: 28
- PE ratio of American States Water Co: 28
- Dividend declared: $0.305
- Dividend yield of American States Water Co: 1.34%
- Dividend yield of American States Water Co: 1.34%
- Number of shares in issue: 36.996 million (up from 36.950million for the same quarter of the previous year)
American States Water (NYSE: AWR) management commentary on 3rd quarter 2019 earnings
SAN DIMAS, Calif.--(BUSINESS WIRE)--Nov. 4, 2019-- American States Water Company (NYSE:AWR) today reported basic and fully diluted earnings per share of $0.76 for the third quarter ended September 30, 2019, as compared to basic and fully diluted earnings per share of $0.62 for the third quarter ended September 30, 2018.
Water Segment:
Diluted earnings per share from the water segment for the three months ended September 30, 2019 increased by $0.06 per share as compared to the same period in 2018. The following items affected the comparability between the two periods (excluding the impact of billed surcharges, which have no impact to net earnings):
Water Segment:
Diluted earnings per share from the water segment for the three months ended September 30, 2019 increased by $0.06 per share as compared to the same period in 2018. The following items affected the comparability between the two periods (excluding the impact of billed surcharges, which have no impact to net earnings):
- An increase in the water gross margin increased earnings by approximately $0.06 per share largely as a result of a May 2019 CPUC decision issued in GSWC's water general rate case, which approved new water rates and adopted supply costs for 2019. The 2019 water revenue requirement has also been reduced to reflect a decrease in depreciation expense, due to a reduction in the overall composite depreciation rates based on a revised study filed in the general rate case. The decrease in depreciation expense lowers the water gross margin, and is offset by a corresponding decrease in depreciation expense as discussed below, resulting in no impact to net earnings.
- An overall decrease in operating expenses (excluding supply costs), which positively impacted earnings by $0.02 per share mostly due to lower depreciation and administrative and general expenses. As discussed above, the lower depreciation expense is reflected in the new revenue requirement approved in the general rate case. The decrease in administrative and general expenses was due, in large part, to timing differences related to the recognition of stock-based compensation expense. These decreases were partially offset by higher maintenance expense, and property and other taxes.
- A decrease in the gains generated during the three months ended September 30, 2019 on investments held to fund a retirement benefit plan due to market conditions as well as an increase in interest expense, decreased water earnings by approximately $0.01 per share, as compared to the same period of 2018.
- Changes in the effective income tax rate resulting from certain flow-through taxes and permanent items for the three months ended September 30, 2019 as compared to the same period in 2018, decreased earnings at the water segment by approximately $0.01 per share.
Electric Segment:
The electric segment’s recorded diluted earnings for the three months ended September 30, 2019 were $0.10 per share. Excluding the $0.07 per share retroactive impact of the general rate case related to the first six months of 2019 and all of 2018, diluted earnings from GSWC’s electric operations for the three months ended September 30, 2019 were $0.03 per share as compared to $0.02 per share for the same period in 2018. There was an increase in the electric gross margin as a result of new rates authorized by the August 2019 CPUC decision on the general rate case, partially offset by an increase in the effective income tax rate as compared to the same period in 2018 resulting from certain flow-through taxes.
Contracted Services Segment:
For the three months ended September 30, 2019, diluted earnings from the contracted services segment were $0.12 per share as compared to $0.13 per share for the same period in 2018. The decrease was largely due to differences in the timing of construction work performed in 2019 as compared to 2018.
The electric segment’s recorded diluted earnings for the three months ended September 30, 2019 were $0.10 per share. Excluding the $0.07 per share retroactive impact of the general rate case related to the first six months of 2019 and all of 2018, diluted earnings from GSWC’s electric operations for the three months ended September 30, 2019 were $0.03 per share as compared to $0.02 per share for the same period in 2018. There was an increase in the electric gross margin as a result of new rates authorized by the August 2019 CPUC decision on the general rate case, partially offset by an increase in the effective income tax rate as compared to the same period in 2018 resulting from certain flow-through taxes.
Contracted Services Segment:
For the three months ended September 30, 2019, diluted earnings from the contracted services segment were $0.12 per share as compared to $0.13 per share for the same period in 2018. The decrease was largely due to differences in the timing of construction work performed in 2019 as compared to 2018.
American States Water Company (NYSE: AWR) stock price history
The image below obtained from Google, shows the stock price history of American States Water Co over the last 5 years. And its been a very good time for American States Water Co stockholders. 5 years ago the stock of American States Water Co was trading at around $35 a stock and its currently trading at $90.95 a stock. That's a very strong return of 159% provided to American States Water Co stockholders over the last 5 years.
The stock of American States Water Co is trading at a lot closer to its 52 week high of $96 than it is to its 52 week low of $60.01 a stock, which to us is a clear indication that the short term sentiment and momentum of American States Water Co stock is very positive at this point in time,
The stock of American States Water Co is trading at a lot closer to its 52 week high of $96 than it is to its 52 week low of $60.01 a stock, which to us is a clear indication that the short term sentiment and momentum of American States Water Co stock is very positive at this point in time,
Recent coverage of American States Water Company
The extract below discusses the latest news regarding American States Water Co as obtained from TheStreet.com
On October 29, 2019, the Board of Directors of American States Water Company (NYSE:AWR) approved a quarterly dividend of $0.305 per share on the Common Shares of the company. This action marks the 334 th consecutive dividend payment by the company. For 65 consecutive years, American States Water Company has increased its calendar year dividend, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. The company's current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term. Dividends on the Common Shares will be payable on December 2, 2019 to shareholders of record at the close of business on November 15, 2019.
On October 29, 2019, the Board of Directors of American States Water Company (NYSE:AWR) approved a quarterly dividend of $0.305 per share on the Common Shares of the company. This action marks the 334 th consecutive dividend payment by the company. For 65 consecutive years, American States Water Company has increased its calendar year dividend, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. The company's current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term. Dividends on the Common Shares will be payable on December 2, 2019 to shareholders of record at the close of business on November 15, 2019.
American States Water Company (NYSE: AWR) stock valuation
So what do we value American States Water Co stock at after the release of their 3rd quarter 2019 earnings report? Based on American States Water Co earnings report our valuation models provides a target (full value) price for American States Water Co at $62.00 a stock. We therefore believe that the stock of American States Water Co is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $62. Therefore we believe a good entry point into American States Water Co stock is at $55.80 or below. We expect the stock of American States Water Co to pull back sharply from current levels as we believe it is extremely overvalued.
We rate the stock of American States Water Co as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $62. Therefore we believe a good entry point into American States Water Co stock is at $55.80 or below. We expect the stock of American States Water Co to pull back sharply from current levels as we believe it is extremely overvalued.
We rate the stock of American States Water Co as a sell
Next earnings release of American States Water Company
It is expected that American States Water Co will publish their 4th quarter and full year earnings for their 2019 fiscal year in early February 2020