Aqua America Returns More to Shareholders, Boosts Buyback - Analyst Blog

The board of directors of Aqua America Inc. (WTR) recently approved a new share repurchase program of 1 million shares. The company also reinitiated a previously approved 685,348 share buyback program in 2014. Of this, 560,000 shares have been bought back to date.

The increased repurchase authorization is expected to boost investors' confidence in the stock. The remaining 125,348 shares of the prior buyback will be concluded in 2015 before the 1 million repurchase plan comes into effect. In the third quarter of 2014, Aqua America repurchased 490,000 shares.

The board's decision reflects the company's commitment towards increasing shareholder returns. It also stems from Aqua America's solid financial position. The company had a cash balance of $4.8 million as of Sep 30, 2014 and net cash from operating activities of $274.4 million in the first nine months of 2014.

Aqua America also holds a track record of consistently sharing profits with its shareholders through dividend payments. In the first nine months of 2014, Aqua America paid dividends worth $83 million compared with $76 million in the year-ago period.

In addition to its solid cash balance, the company also has sound credit facilities to fund its capital requirements. Water utilities in the U.S. have lately been modernizing their outmoded infrastructure to cater to increasing demand.

In Aug 2014, Aqua America raised its five-year $150,000 unsecured revolving credit facility to $200,000. This program will provide the necessary working capital for infrastructure development.

In terms of posting positive earnings surprises, this water service provider has performed steadily with its earnings surpassing the Zacks Consensus Estimate in three out of the last four quarters, with an average beat of 2.92%.

Another company in the water utility space, American Water Works Company, Inc. (AWK), posted positive earnings surprises in two out of the last four quarters, with an average surprise of 2.69%.
 
Zacks Rank

Aqua America currently holds a Zacks Rank #2 (Buy). Other equally well placed stocks in the water utility industry include American States Water Co. (AWR) and Artesian Resources Corp. (ARTNA). Both these stocks also carry a Zacks Rank #2.