The Zacks Utility - Water Supply industry includes companies that provide drinking water and wastewater services to industrial, commercial and residential customers, along with numerous military bases across the country.

Healthy and hygienic living requires a constant, uninterrupted flow of clean, potable water and reliable sewer services. Water utilities carry out the regular crucial work of meeting millions of Americans’ increasing demand for potable water. Storage tanks, treatment and desalination facilities are owned by utility operators to provide continuous potable water to all types of customers.

Water utility operators own nearly 2.2 million miles of pipelines that are getting old. Utilities continuously replace old pipelines and add new ones to expand operations. Per the U.S. Environmental Protection Agency, an estimated $963 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

To maintain, modernize and expand their operations, utilities are turning to capital markets for loans. In September 2024, the U.S. Federal Reserve lowered the borrowing rate by 50 basis points. The rate decline should improve the prospects of capital-intensive utilities as their capital servicing costs may go down, boosting margins and profitability.

In this article, we have run a comparative analysis on two Zacks Utility - Water Supply companies — American States Water AWR and SJW Group SJW — to decide which one is a better pick for your portfolio.

Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American States Water has a market capitalization of $3.14 billion, while SJW Group has $1.87 billion.

AWR & SJW’s Growth Projections

The Zacks Consensus Estimate for American States Water’s 2024 earnings is pinned at $3.03 per share on revenues of $577 million. This implies a year-over-year bottom-line increase of 6.3% and a top-line decline of 3.1%.

The Zacks Consensus Estimate for SJW Group’s 2024 earnings is pegged at $2.75 per share on revenues of $709.6 million. This indicates year-over-year bottom and top-line growth of 2.6% and 5.9%, respectively.

AWR & SJW Stock’s Price Performance

In the past six months, shares of AWR and SJW have gained 19.8% and 5.2%, respectively. The industry grew 15.4% in the same time frame.

Image Source: Zacks Investment Research

AWR & SJW’s Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for American States Water and SJW Group is 13.45% and 7.1%, respectively, compared with the industry’s 11.21%.