American Water, the largest water utility in the U.S., disclosed that it had been hit by a cyberattack.The Camden, New Jersey-based company said in a security statement on its website that it had learned of "unauthorized activity in our computer networks and systems" last Thursday, which it determined "to be the result of a cybersecurity incident."The company said on Tuesday that it shut down its customer service portal, and as a result, its billing function "until further notice" and will not charge any la ...

U.S. public utility giant American Water says it has disconnected some of its systems after discovering that hackers breached its internal networks last week. American Water, which supplies drinking water and wastewater services to more than 14 million people across the United States, confirmed the security incident in an 8-K regulatory filing with the U.S. Securities and Exchange Commission on Monday. The New Jersey-based company said in its filing that its water and wastewater facilities are “at this time ...

Now that the most important event of the year, the Federal Reserve (the Fed) interest rate cuts, is over, investors wonder where their capital can be safely treated in the face of potential volatility in the coming months. To satisfy this need to keep a stable portfolio, a decent weight in low beta stocks, characterized by smaller average daily moves compared to the S&P 500 index, is called for.Some investors only focus on a stock's beta without considering some of the fundamentals and sentiment that the ma ...

Core Viewpoint - American Water Works Company, Inc. (AWK) is positioned as a strong investment option in the utility sector due to strategic capital investments aimed at enhancing infrastructure and reliability, alongside rising earnings estimates [1] Growth Projections & Surprise History - The Zacks Consensus Estimate for AWK's earnings per share (EPS) for 2024 and 2025 has increased by 0.6% and 0.2% respectively over the past 60 days [2] - The consensus estimates for sales in 2024 and 2025 are projected at $4.42 billion and $4.55 billion, reflecting year-over-year growth of 4.3% and 3.1% respectively [2] - AWK's long-term earnings growth rate is estimated at 8%, with an average earnings surprise of 1.1% over the last four quarters [2] Financial Health - AWK's total debt to capital ratio stands at 56.4%, which is better than the sector average of 57.9% [3] - The company's time-to-interest earned ratio was 3.5 at the end of Q2, indicating a strong ability to meet future interest obligations [3] Expansion Strategy - In the first half of 2024, AWK completed five acquisitions, adding 33,400 new customers, with 22 pending acquisitions expected to add another 59,000 customers [4] - AWK's organic operations, including extensive infrastructure, contribute significantly to its earnings [4] Long-term Investments - AWK invested $1.4 billion in upgrades and acquisitions in the first half of 2024 and plans to invest $3.1 billion throughout the year [5] - The company aims to invest $16-$17 billion from 2024 to 2028 and $34-$38 billion from 2024 to 2033, with 69% of the 2024-2033 expenditure focused on infrastructure strengthening [5] Dividend Information - AWK has a current dividend yield of 2.09%, surpassing the S&P 500 composite average of 1.5% [6] - The company anticipates a long-term increase in its dividend per share in the range of 7-9%, pending board approval [6] Share Performance - AWK shares have increased by 23.2% over the past six months, outperforming the industry growth of 17% [7]

Core Viewpoint - The Federal Reserve's recent 50 basis point interest rate cut aims to support the economy amid recession fears, impacting various sectors positively, particularly interest rate-sensitive stocks [1][3]. Group 1: Interest Rate Impact on Sectors - The fintech sector is expected to benefit from lower interest rates, as previous high rates hindered technological advancements and product innovation [3]. - Utility companies, which require significant capital for infrastructure upgrades, will gain from reduced borrowing costs due to the rate cut [3]. - The home building industry will see a boost as lower mortgage rates encourage home purchases, driven by the substantial 50 basis point cut [3]. Group 2: Recommended Stocks - PayPal Holdings Inc. (Zacks Rank 1) is experiencing robust growth in total payment volume, with projected EPS growth of 10.8% and revenue growth of 7.6% for the next year [4][5]. - Fidelity National Information Services Inc. (Zacks Rank 2) is benefiting from organic growth in banking solutions, with a projected EPS growth of 11.6% and revenue growth of 4.1% for the next year [7][8]. - American Water Works Co. Inc. (Zacks Rank 2) is expanding through acquisitions and infrastructure investments, with projected EPS growth of 8% and revenue growth of 3.1% for the next year [11][12]. - OGE Energy Corp. (Zacks Rank 2) plans a $6 billion investment to upgrade infrastructure, with projected EPS growth of 5.6% and revenue growth of 11.3% for the next year [14][15]. - M/I Homes Inc. (Zacks Rank 1) is recognized for its strong customer service and innovative designs, with projected EPS growth of 5.6% and revenue growth of 5.1% for the next year [17][19].

Core Viewpoint - The utilities sector is expected to benefit from anticipated interest rate cuts, with a focus on five selected utility stocks that show positive earnings growth potential and stable revenue growth [1][2][6]. Utilities Sector Overview - The utilities sector is typically defensive, but it has surprisingly become a strong performer in 2024, rallying 21.7% year-to-date, contrasting with a decline of over 11% in 2023 [3][5]. - Utilities are capital-intensive and rely on consistent investments for infrastructure upgrades, making them sensitive to changes in interest rates [1][5]. Selected Utility Stocks - **NiSource Inc. (NI)**: Plans to invest $16.4 billion through 2028 for infrastructure modernization, with a projected EPS growth of 6.8% and revenue growth of 12.1% for the next year. Current dividend yield is 3.2% [7][8]. - **American Water Works Co. Inc. (AWK)**: Benefits from acquired assets and military contracts, with projected EPS growth of 8% and revenue growth of 3.1%. Current dividend yield is 2.1% [9][10]. - **Xcel Energy Inc. (XEL)**: Focused on reducing coal usage and achieving carbon neutrality by 2050, with projected EPS growth of 8% and revenue growth of 6.2%. Current dividend yield is 3.5% [11][12]. - **Evergy Inc. (EVRG)**: Expanding operations in the transmission market and aiming for carbon neutrality by 2045, with projected EPS growth of 4.9% and revenue growth of 2%. Current dividend yield is 4.3% [13][14]. - **DTE Energy Co. (DTE)**: Plans to invest $20 billion from 2024 to 2028, promoting clean energy and targeting zero-carbon emissions by 2050, with projected EPS growth of 7.3% and revenue growth of 4.3%. Current dividend yield is 3.3% [15][16].

Industry Overview - The Zacks Utility - Water Supply industry is providing continuous services to millions of customers in the U.S. and is focusing on infrastructure upgrades and maintenance to enhance service reliability [1] - The U.S. water infrastructure, comprising over 2.2 million miles of pipelines, is aging, with nearly 20% of installed water mains beyond their useful lives, leading to significant water waste and potential contamination [2] - An estimated $896 billion investment is required over the next 20 years to sustain and expand drinking water and wastewater services to meet demand, according to the U.S. Environmental Protection Agency [2] - The regulated water industry is fragmented, posing operational challenges for small service providers in meeting funding requirements for necessary upgrades [3] - The Federal Reserve's intention to cut interest rates may allow utility providers to secure funding at lower costs for infrastructure projects [3] Company Performance - American Water Works Company (AWK) has a three-month return of 12.6%, a dividend yield of 2.13%, and plans to invest $3.1 billion in 2024, with a total investment of $16-17 billion planned from 2024 to 2028 [6] - American States Water Company (AWR) has achieved a three-month return of 15.4%, a dividend yield of 2.30%, and aims to invest $573.1 million from 2025 to 2027 [7] - SJW Group has reported a three-month return of 13.1%, a dividend yield of 2.72%, and plans to invest $540 million in water and wastewater infrastructure over the next three years [8]

Market Overview - Volatility has returned to Wall Street, disrupting the rebound following a significant selloff in early August, primarily due to fears over the economy's health triggered by disappointing jobs data [1][2] - September has historically been one of the worst months for stocks, which may prolong market volatility [4] Jobs Data Impact - The weak jobs data released indicated that private payrolls added only 99,000 jobs in August, the smallest increase since January 2021, and significantly below the consensus estimate of 145,000 [2] - Following the jobs report, the Dow declined by 0.5% and the S&P 500 shed 0.3%, marking the third consecutive session of decline for the S&P 500 [2] Manufacturing Sector - The manufacturing sector has been struggling, with the Institute for Supply Management (ISM) reporting a manufacturing PMI of 47.2 in August, indicating contraction as it is below the neutral level of 50 [3] - Higher borrowing costs have increased raw material costs and reduced demand in the manufacturing sector [3] Federal Reserve and Inflation - Inflation has decreased sharply but remains above the Federal Reserve's target of 2%, with expectations of a 25-basis-point rate cut this month [3] - The Federal Reserve has not yet clarified the magnitude or number of rate cuts planned for the year [3] Defensive Investment Recommendations - Given the current market conditions, investing in utility stocks is recommended as they are considered defensive in nature [1][5] - Suggested utility stocks include: - **American Water Works Company, Inc. (AWK)**: Expected earnings growth rate of 7.4%, beta of 0.69, and a dividend yield of 2.12% [6][7] - **American States Water Company (AWR)**: Expected earnings growth rate of 6.3%, beta of 0.49, and a dividend yield of 2.29% [9] - **Evergy, Inc. (EVRG)**: Expected earnings growth rate of 8.8%, beta of 0.62, and a dividend yield of 4.27% [11] - **OGE Energy Corp. (OGE)**: Expected earnings growth rate of 3.4%, beta of 0.74, and a dividend yield of 4.27% [14]

Group 1: Company Developments - American Water Works (AWK) announced the acquisition of Silver Creek Water Corporation for $45 million, expected to close in mid-November, adding 8,000 water customers to its Indiana American Water unit [1] - Indiana American Water has made strategic acquisitions in 2023, including Claypool Water System and Sunset Village Water System, which added 250 water customers [1] - AWK completed five acquisitions in the first half of 2024, adding nearly 33,400 new customers, with 22 pending acquisitions expected to add another 59,000 customers [3] Group 2: Industry Trends - The U.S. water industry is fragmented, with nearly 50,000 community water systems and 16,000 wastewater treatment systems, many of which are too small to perform necessary repairs, leading to service disruptions [2] - A significant portion of U.S. water infrastructure is nearing the end of its effective service life, necessitating investments for upgrades, prompting large water utility companies to acquire smaller players [2] - California Water Service Group (CWT) is also pursuing strategic acquisitions in high-growth markets, with recent acquisitions adding 1,800 customers [4] Group 3: Market Performance - AWK shares have outperformed the industry, gaining 21.4% in the past six months compared to the industry's 17.9% growth [5]

Core Viewpoint - American Water Works Company, Inc. (AWK) is set to increase its annual revenues by approximately $79.5 million due to new water and wastewater rates approved by the New Jersey Board of Public Utilities, effective September 15, 2024, aimed at recovering over $1.3 billion in infrastructure investment costs [1][2]. Group 1: Rate Hike and Infrastructure Investment - The aging water supply system necessitates regular investments for upgrades and maintenance to ensure long-term growth, with water rate hikes supporting these strategic investments [2]. - AWK plans to invest $3.1 billion in 2024, with a total investment range of $16-$17 billion for the 2024-2028 period and $34-$38 billion for the 2024-2033 period, focusing on infrastructure improvements [3]. - The introduction of the Universal Affordability Tariff aims to provide discounts for income-eligible customers, enhancing affordability [2]. Group 2: Industry Investment Needs - The U.S. Environmental Protection Agency estimates that $625 billion is needed for drinking water and $271 billion for wastewater pipeline maintenance and expansion over the next 20 years [3]. - Other water utilities, such as SJW Group, American States Water Company, and California Water Service Group, are also planning significant capital investments to strengthen their infrastructure [3]. Group 3: Performance and Earnings - AWK shares have increased by 10.9% over the past three months, outperforming the industry growth of 9.4% [6]. - AWK currently holds a Zacks Rank 2 (Buy), indicating positive market sentiment [8].