Consolidated Water Misses on Earnings & Revs - Analyst Blog

Consolidated Water Co. Ltd. CWCO reported first-quarter 2014 earnings per share of 4 cents, lagging the Zacks Consensus Estimate of 9 cents by 55.6%. On a year-over-year basis, the company's earnings fell a substantial 84.6%.

A decline in earnings and profit due to Consolidated Water's equity investment in its affiliate, Ocean Conversion (BVI) Ltd. (“OC-BVI”), a rise in project development expenses by the company's Mexican unit N.S.C. Agua, S.A. de C.V. (“NSC”) and lower operating income from retail business segment collectively led to the unfavorable earnings result.

Total Revenue

In the first quarter of 2014, Consolidated Water's total revenue was $16.3 million, missing the Zacks Consensus Estimate of $17 million by 4.1%.

Quarterly total revenue fell 1.6% from $16.56 million a year ago, primarily due to lower revenues from the company's Retail Water (down 4.4% year over year) and Services (down 9.1% year over year) segments. This was partially offset by higher contribution from the company's Bulk water (up 1% year over year) businesses.

Operational Update

In the quarter under review, Consolidated Water's total cost of revenues was $10.38 million, up 0.5% year over year due to higher costs of revenues at its Retail and Services segments.

The company's general and administrative expenses during the quarter were $5.3 million compared with $3.6 million a year ago. A 47.2% year-over-year rise in general and administrative expenses was mainly due to a surge in project development costs at NSC.

Income from operations at Consolidated Water was $0.63 million, down 76.2% from $2.65 million a year ago.

In the reported quarter, interest expenses increased 123.3% year over year to around $0.3 million primarily due to prepayment premium paid for the early redemption of the remaining outstanding balance on the company's bonds payable.

Financial Update

As of Mar 31, 2014, Consolidated Water's cash and cash equivalents were $24.7 million versus $33.6 million as of Dec 31, 2013.

The company had no outstanding long-term debt as of Mar 31, 2014 compared with $5.2 million at the end of 2013.

In the first three months of 2014, Consolidated Water's net cash used in operating activities was $2.1 million versus $3.2 million in the year-ago comparable period.

At the Peers

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

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

Zacks Rank

Consolidated Water currently has a Zacks Rank #4 (Sell). However, another better-ranked stock in the water utility industry is American Water Works Company, Inc. AWK, carrying a Zacks Rank #2 (Buy).

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