Aqua America Beats on Earnings, Misses Revs - Analyst Blog

Aqua America Inc. WTR reported first-quarter 2014 earnings per share of 24 cents, edging past the Zacks Consensus Estimate as well as the year-ago earnings of 23 cents by a penny. 

 

The marginal beat can be attributed to increased investments in infrastructure modernization and benefits from the execution of repair tax accounting at the Pennsylvania unit. However, the positives were partially offset by the rising operation and maintenance expenses.

 

Revenue

 

The company's operating revenues for the quarter were $183 million, missing the Zacks Consensus Estimate by 1.9%. Quarterly revenues, however, surged 2.3% year over year.

 

Operational Update

 

In the quarter under review, Aqua America's total costs and expenses increased 3.8% to approximately $115.9 million on account of escalating operations and maintenance expenses as well as depreciation expenses. 

 

The company had to combat the harsh winter weather as frozen pipes, main breaks and an unusual amount of snow removal aggravated maintenance cost.

 

The revenue upturn was offset by an increase in total costs and expenses. In the reported quarter, operating margin declined to 36.5% from 37.5% in the year-ago quarter.

 

Aqua America's interest expenses totaled $19.3 million, flat from the comparable year-ago period.

 

Financial Highlights

 

As of Mar 31, 2014, Aqua America's current assets were $213.6 million versus $203.0 million as of Dec 31, 2013.

 

Long-term debt (excluding current portion) as of Mar 31, 2014 was $1,498.0 million compared with $1,468.6 million at the end of 2013.

 

Other Company Releases

 

American Water Works Company, Inc. AWK reported first-quarter 2014 adjusted earnings of 40 cents per share, beating the Zacks Consensus Estimate by 14.3%.

 

Connecticut Water Service Inc. CTWS posted first-quarter 2014 earnings of 27 cents per share, in line with the Zacks Consensus Estimate.

 

Middlesex Water Co. MSEX reported first-quarter 2014 earnings of 19 cents per share, beating the Zacks Consensus Estimate by 18.8%.

 

Our View

 

Aqua America's nominal earnings beat in the first quarter came on account of its proactive infrastructure upgrades. The company spent around $60 million in modernization programs in the first quarter. The company expects to invest $325 million in 2014 and $1 billion over next three years. These systematic capital expenditures will enhance Aqua America's service reliability. 

 

Meanwhile, the company continues with its acquisition drive and has announced five asset purchases to-date in 2014. These multiple assets buyout will broaden Aqua America's operational capability as well as lead to customer additions. 

 

Aqua America currently has a Zacks Rank #3 (Hold).