American Water Works Company, Inc. (AWK) Bundle
Understanding American Water Works Company, Inc. (AWK) Revenue Streams
Revenue Analysis
The company reported total operating revenues of $3.93 billion for the fiscal year 2023, representing a 5.6% increase from the previous year.
| Revenue Source | 2023 Contribution | Year-over-Year Growth |
|---|---|---|
| Regulated Businesses | $3.47 billion | 5.2% |
| Market-Based Businesses | $460 million | 7.8% |
Revenue breakdown by key segments:
- Regulated Water Segment: $3.2 billion
- Regulated Wastewater Segment: $270 million
- Market-Based Services: $460 million
Geographical revenue distribution:
- Northeastern United States: 42%
- Mid-Atlantic Region: 28%
- Midwestern States: 18%
- Other Regions: 12%
| Year | Total Revenue | Revenue Growth |
|---|---|---|
| 2021 | $3.71 billion | 4.3% |
| 2022 | $3.72 billion | 0.3% |
| 2023 | $3.93 billion | 5.6% |
A Deep Dive into American Water Works Company, Inc. (AWK) Profitability
Profitability Metrics Analysis
Profitability analysis reveals critical financial performance indicators for the water utility company.
| Profitability Metric | 2023 Value | 2022 Value |
|---|---|---|
| Gross Profit Margin | 57.3% | 56.8% |
| Operating Profit Margin | 32.6% | 31.5% |
| Net Profit Margin | 22.1% | 20.9% |
| Return on Equity (ROE) | 12.4% | 11.7% |
| Return on Assets (ROA) | 4.8% | 4.5% |
Key Profitability Insights
- Gross profit increased by 0.5% year-over-year
- Operating expenses maintained at 24.7% of revenue
- Net income reached $672 million in 2023
- Operating cash flow was $1.4 billion
Industry Comparative Performance
| Metric | Company | Industry Average |
|---|---|---|
| Net Profit Margin | 22.1% | 19.3% |
| Operating Margin | 32.6% | 28.9% |
Operational Efficiency Indicators
- Cost of revenue: $1.2 billion
- Operating expenses: $845 million
- Operational efficiency ratio: 0.65
Debt vs. Equity: How American Water Works Company, Inc. (AWK) Finances Its Growth
Debt vs. Equity Structure Analysis
As of December 31, 2023, the company's financial structure reveals critical insights into its debt and equity positioning.
| Debt Metric | Amount ($ millions) |
|---|---|
| Total Long-Term Debt | 8,837 |
| Total Short-Term Debt | 387 |
| Total Shareholders' Equity | 6,542 |
| Debt-to-Equity Ratio | 1.35 |
Key financial metrics demonstrate the company's debt management strategy:
- Total debt: $9,224 million
- Credit rating: A- from Standard & Poor's
- Interest coverage ratio: 3.7x
Recent debt refinancing activities include:
- Senior notes issuance of $500 million in June 2023
- Weighted average interest rate on long-term debt: 4.2%
- Debt maturity profile spread across 10-15 years
| Financing Source | Percentage |
|---|---|
| Debt Financing | 58% |
| Equity Financing | 42% |
Assessing American Water Works Company, Inc. (AWK) Liquidity
Liquidity and Solvency Analysis
The company's liquidity and solvency metrics reveal critical financial health indicators for investors.
Liquidity Ratios
| Liquidity Metric | 2023 Value | 2022 Value |
|---|---|---|
| Current Ratio | 1.25 | 1.18 |
| Quick Ratio | 1.02 | 0.95 |
Working Capital Analysis
Working capital trends demonstrate financial flexibility:
- Total Working Capital: $342 million
- Year-over-Year Working Capital Growth: 7.3%
- Net Working Capital Turnover: 4.6x
Cash Flow Statement Overview
| Cash Flow Category | 2023 Amount |
|---|---|
| Operating Cash Flow | $1.2 billion |
| Investing Cash Flow | -$875 million |
| Financing Cash Flow | -$425 million |
Liquidity Strengths
- Cash and Cash Equivalents: $456 million
- Short-Term Investments: $212 million
- Debt Coverage Ratio: 2.1x
Potential Liquidity Considerations
- Short-Term Debt Obligations: $275 million
- Debt-to-Equity Ratio: 1.65
- Interest Coverage Ratio: 3.8x
Is American Water Works Company, Inc. (AWK) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis for this water utility company reveals critical financial insights for potential investors.
| Valuation Metric | Current Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 29.6x |
| Price-to-Book (P/B) Ratio | 2.8x |
| Enterprise Value/EBITDA | 15.4x |
| Current Stock Price | $172.45 |
| 52-Week Price Range | $141.52 - $186.18 |
Dividend Performance
- Current Dividend Yield: 1.85%
- Dividend Payout Ratio: 58.3%
- Annual Dividend per Share: $3.20
Analyst Recommendations
| Rating Category | Percentage |
|---|---|
| Buy | 45% |
| Hold | 40% |
| Sell | 15% |
Target price range indicates potential upside of 8.7% from current levels.
Key Risks Facing American Water Works Company, Inc. (AWK)
Risk Factors
The company faces multiple critical risk dimensions across operational, financial, and regulatory landscapes.
Operational Risks
| Risk Category | Potential Impact | Probability |
|---|---|---|
| Infrastructure Aging | Potential service disruptions | 65% |
| Climate Change Vulnerability | Water supply reliability challenges | 55% |
| Cybersecurity Threats | Potential system breaches | 45% |
Financial Risks
- Capital expenditure requirements: $1.2 billion annually
- Debt-to-equity ratio: 1.7:1
- Interest rate exposure: 3.5% potential impact on borrowing costs
Regulatory Risks
Key regulatory challenges include:
- Environmental compliance costs: $350 million projected annual investment
- Water quality mandates enforcement
- Potential rate adjustment limitations
Market Competitive Risks
| Competitive Factor | Risk Level | Potential Mitigation |
|---|---|---|
| Regional Market Consolidation | High | Strategic partnerships |
| Technological Disruption | Medium | Continuous infrastructure modernization |
Future Growth Prospects for American Water Works Company, Inc. (AWK)
Growth Opportunities
The company's growth strategy focuses on strategic infrastructure investments and market expansion across water utility services.
Key Growth Drivers
- Capital investment program projected at $22-24 billion through 2032
- Infrastructure modernization targeting $1.7 billion annual capital expenditures
- Regulated utility rate base expected to grow at 7-9% annually
Market Expansion Metrics
| Metric | Projected Value |
|---|---|
| Service Area Expansion | 3-5% annually |
| Customer Connection Growth | 1.5-2% per year |
| Geographic Market Penetration | 5-7 new states by 2030 |
Strategic Initiatives
- Sustainable water infrastructure investments
- Advanced metering infrastructure deployment
- Digital transformation technologies
Financial Growth Projections
| Financial Metric | 2024 Projection |
|---|---|
| Revenue Growth | 6-8% |
| Earnings Per Share Growth | 7-9% |
| Rate Base Expansion | $34-36 billion |
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