Breaking Down American Water Works Company, Inc. (AWK) Financial Health: Key Insights for Investors

Breaking Down American Water Works Company, Inc. (AWK) Financial Health: Key Insights for Investors

US | Utilities | Regulated Water | NYSE

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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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