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In a report published Wednesday, Bank of America analyst Brian Chin reiterated a Buy rating on
American Water Works Company, and raised the price target from $47.00 to $48.00.
In the report, Bank of America noted, “American Water provided 2014 guidance of $2.35-$2.45, a midpoint slightly higher than consensus and BofAML 2014 estimates of $2.39 and $2.38 respectively. The company also reaffirmed 2013 guidance of $2.17 and $2.22, BofAML current estimate remains $2.19. Notably, the 2014 guidance midpoint was above the long term EPS CAGR target range; suggesting if the company can build on the 2014 target in 2015+, then a rebasing of the long term EPS outlook may be in order. Underneath guidance was a regulated O&M cost cutting effort that should provide more rate headroom going forward (with a target efficiency ratio of 35% in 2018), and capturing of synergies from acquisitions already closed. Also, the amount of capex under DSIC/future test years in the forecast exceeded our expectations, pushing our forecast up to $2.38 / $2.59 for 2014 / 15 (We are initiating our 2016 forecast of $2.74.) Overall, we walked away with an improved confidence in the outlook.”
American Water Works Company closed on Tuesday at $41.45.
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