Zacks Industry Outlook Highlights American Water Works, Companhia de Saneamento Basico do Estado de Sao Paulo, American States Water and SJW

Zacks Equity Research
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In This Article:

For Immediate Release

Chicago, IL – September 25, 2024 – Today, Zacks Equity Research discusses American Water Works Company AWK, Companhia de Saneamento Basico do Estado de Sao Paulo SBS, American States Water Co. AWR and SJW Group SJW.

Industry: Water Utility

Link: https://www.zacks.com/commentary/2340480/4-stocks-to-buy-from-the-promising-water-supply-industry

Water utilities work day in and day out to ensure an uninterrupted supply of clean, potable water and reliable sewer services to millions of customers in the United States. These are essential for healthy and hygienic living.

The aging of pipelines is concerning, but water utilities continue with their upgrade and maintenance projects to minimize disruptions in operations. American Water Works Company, with its widespread operations, provides services to domestic customers and military bases and offers an excellent opportunity to stay invested in the water utility space. Other water utilities worth adding to your portfolio are Companhia de Saneamento Basico do Estado de Sao Paulo, American States Water Co. and SJW Group.

About the Water Supply Industry

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

Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water to customers. The highly fragmented industry creates operational challenges, but increasing efficient water usage by individuals and other industries helps ensure that water is not wasted. The capital-intensive water utility operators will benefit from the interest rate cuts and continue with their capital expenditure at reduced capital servicing expenses.

3 Trends Pivotal for Shaping the Water Supply Industry's Future

Interest Rate Decline is a Tailwind: In order to maintain, upgrade and expand operations, utilities approach capital markets for loans. Multiple rate hikes by the Federal Reserve took the benchmark rate to the 5.25-5.50% range, adversely impacting utility operators. The U.S. Federal Reserve has finally lowered the benchmark rate by 50 basis points, bringing down rates to a range of 4.75%-5%. The rates were lowered for the first time in four years.

Capital-intensive domestic-focused utilities will benefit from the Fed's decision to reduce interest rates. The drop in interest rates is a big positive for utility operators planning large investments in infrastructure upgrades.

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