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Aqua America Upgraded On M&A Prospects

Aqua America Upgraded On M&A Prospects

Following its meeting with water utility executives around the 2017 NAWC Water Summit, Wells Fargo Securities upgraded shares of Aqua America Inc (NYSE: WTR). The firm attributed the positivity to the management focus on the "tuck-in" M&A arena and expectations for a constructive outcome in the upcoming PA rate relief case.

As such, the firm upgraded shares of Aqua America from Market Perform to Outperform and raised its price target from $35 to $40.

At the time of writing, shares of Aqua America were up 1.53 percent at $35.84.

Analysts Jonathan Reeder, Neil Kalton and Sarah Akers said they are now increasingly convinced that potentially pursuing growth outside of the regulated water/wastewater space, namely gas LDC purchase or a non-regulated venture, is on the backburner for now.

Instead, the analysts said the company is focused on capitalizing on the budding opportunities in the "tuck-in" M&A arena.The analysts noted that their earnings per forecast incorporate only $50 million of deals annually in 2018 and beyond versus the more than $120 million pending. Therefore, the analysts said there could be upside to their outlook if the accelerated pace continues.

See also: Pour A Glass Of This New Water ETF

Wells Fargo also expects a constructive outcome to be achieved in the upcoming PA rate case. The company indicated it would file infrastructure charge in 2017 and the rate case filing will likely occur in 2018, with resolution expected in 2019.

The firm said it believes the two concerns have weighed on the shares, as a result of which the shares currently trade at a 7-9 percent discounts to water peers. Now that the overhangs are removed, the firm believes a more in line multiple to water utility peers is deserved and should materialize.
Image Credit: By Aqua America, Inc. [Public domain], via Wikimedia Commons

Latest Ratings for WTR

Mar 2019UpgradesNeutralBuy
Dec 2018UpgradesNeutralOutperform
Sep 2018Initiates Coverage OnIn-Line

View More Analyst Ratings for WTR
View the Latest Analyst Ratings

Posted-In: Jonathan Reeder Neil Kalton Sarah Akers Wells Fargo SecuritiesAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


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