Exchange: LSE | Sector: Utilities | Industry: General Utilities
Q3 2024
Published: Oct 30, 2024
Earnings Highlights
Revenue of $1.32B up 13.4% year-over-year
EPS of $1.79 increased by 7.8% from previous year
Gross margin of 62.0%
Net income of 350.00M
""Our ongoing commitment to infrastructure improvements is not just about compliance but also about enhancing service delivery to our customers. We're seeing the positive effects in our latest financial results."" - CEO
American Water Works Company Inc (0HEW.L) Q3 2024 Financial Results Analysis: Sustained Growth and Strong Profitability
Executive Summary
In Q3 2024, American Water Works Company Inc (0HEW.L) delivered a strong performance characterized by healthy revenue growth of 15.14% quarter-over-quarter (QoQ) and a 13.37% increase year-over-year (YoY), reaching $1.32 billion. The company's net income climbed to $350 million, reflecting a net profit margin of 26.4%, which is attributed to effective cost management and operational efficiency improvements.
Management emphasized the strategic focus on enhancing service reliability and operational efficiencies, particularly through upgrades in infrastructure and investment in technology. This growth and strong profitability provide a solid foundation for future expansion, making the company an attractive option for investors seeking stability within the Utilities sector.
The gross profit margin improved to 61.98%, indicating strengthened pricing power and cost control mechanisms in the delivery of water and wastewater services. The operating margin stood at 41.04%, consistent with operational efficiency initiatives.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.32B
13.37%
15.14%
Gross Profit
820.00M
12.18%
55.01%
Operating Income
543.00M
13.60%
21.21%
Net Income
350.00M
8.36%
26.35%
EPS
1.79
7.83%
26.06%
Key Financial Ratios
currentRatio
0.58
grossProfitMargin
47.4%
operatingProfitMargin
41%
netProfitMargin
26.5%
returnOnAssets
1.1%
returnOnEquity
3.38%
debtEquityRatio
1.29
operatingCashFlowPerShare
$3.48
freeCashFlowPerShare
$-0.6
dividendPayoutRatio
42.6%
priceToBookRatio
2.72
priceEarningsRatio
20.16
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Commentary Strategy and Operational Focus: The CEO stated, "Our ongoing commitment to infrastructure improvements is not just about compliance but also about enhancing service delivery to our customers. We're seeing the positive effects in our latest financial results."
Market Conditions: The CFO commented on regulatory conditions, saying, "We anticipate that the current regulatory environment will support our planned capital investments and provide a favorable backdrop for growth in the coming quarters."
"Our ongoing commitment to infrastructure improvements is not just about compliance but also about enhancing service delivery to our customers. We're seeing the positive effects in our latest financial results."
â CEO
"We anticipate that the current regulatory environment will support our planned capital investments and provide a favorable backdrop for growth in the coming quarters."
â CFO
Forward Guidance
Looking ahead, management has reaffirmed its revenue growth targets in the range of 7-10% for the coming fiscal year, given the planned investments in infrastructure and technology enhancement. Analysts note that while the guidance appears achievable, successful execution on these projects and regulatory approvals will be critical. Investors should monitor upcoming infrastructure bills and potential rate increases, which may further enhance profitability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HEW.L Focus
61.98%
41.00%
3.38%
20.16%
0P59.L
61.10%
22.10%
1.69%
28.78%
0LP3.L
58.70%
43.00%
73.50%
42.94%
0KW4.L
58.50%
33.00%
6.58%
21.72%
0KIX.L
38.60%
-4.30%
5.71%
10.30%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for American Water Works Company Inc remains positive, backed by strong quarterly performance, robust growth potential, and strategic focus on improving service delivery and infrastructure. However, investors must remain vigilant regarding regulatory shifts and competitive pressures that could impact future profitability. Overall, the company presents a stable investment opportunity within the Utilities sector, especially for long-term growth-focused portfolios.
Key Investment Factors
Growth Potential
American Water Works' commitment to infrastructure improvement and technology integration provides a solid growth trajectory, with expected annual growth rates of 7-10% in revenue.
Profitability Risk
Regulatory changes and environmental impacts pose potential risks, as any undue financial burdens could affect profitability. The current high debt levels are also a concern in a rising interest rate environment.
Financial Position
Despite a healthy equity position with total stockholders' equity reported at $10.36 billion and a debt-to-equity ratio of 1.29, the company must manage its leverage carefully amid ongoing capital expenditures.
SWOT Analysis
Strengths
Strong revenue and profit growth
High customer base with steady demand for services
Effective cost management practices
Weaknesses
High level of debt compared to equity
Dependency on regulatory approvals for rate adjustments
Opportunities
Expansion into underserved markets
Investment in technology to improve service delivery
Potential for regulatory support for infrastructure spending