Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
Monday, Seaport Global Securities analyst Angie Storozynski upgraded California Water Service Group (NYSE:CWT) stock rating from Neutral to Buy, setting a price target of $54.00. According to InvestingPro data, CWT has demonstrated strong fundamentals with a 30.5% revenue growth over the last twelve months and maintains an impressive 32-year streak of consecutive dividend increases. Storozynski expressed continued enthusiasm for AI-related load growth in integrated electric utilities and independent power producers (IPPs). The analyst's optimism for water utilities remains steadfast, citing a preference for the sector's low-risk, predictable earnings per share (EPS) growth.
The upgrade comes as the price-to-earnings (P/E) premium for water over electric utilities has decreased significantly, from approximately 65% in late 2021 to around 30%. Storozynski noted that the long-term EPS growth for both electric and water utilities is now comparable. CWT currently trades at a P/E ratio of 14.94x, and InvestingPro analysis indicates the stock is fairly valued, with analyst targets ranging from $54 to $60, suggesting potential upside. Get access to detailed valuation metrics and 12+ additional ProTips with an InvestingPro subscription. Both sectors require equity for growth, and despite the waning allure of the sustainability trade, certain water utilities still capture the analyst's attention.
Storozynski highlighted that California Water Service Group's rate base growth of about 13% and its discounted valuation contributed to the upgrade to Buy status. The company's financial health score is rated as "GOOD" by InvestingPro, with a solid 57.4% gross profit margin and 12% return on equity. Alongside CWT, the analyst also favors American Water Works (NYSE:AWK) for its defensive characteristics and SJW Group (NYSE:SJW) for its highly discounted valuation. The price targets for these companies have been adjusted, with AWK's target increased to $156 from $140, and SJW's target reduced to $59 from $61.
The report concluded with an invitation to review company-specific comments, suggesting further details are available regarding the individual assessments of AWK, SJW, and CWT.
In other recent news, California Water Service Group reported its fourth-quarter 2024 earnings, exceeding analysts' expectations. The company achieved an earnings per share (EPS) of $0.33, surpassing the forecasted $0.23, and generated revenue of $222.2 million, slightly above the anticipated $214.77 million. For the full year, California Water's operating revenue reached $1 billion, marking significant growth from $794.6 million in 2023. Net income for the year increased by 267.6% to $190.8 million. The company continues to focus on strategic expansions, particularly in Texas, where it has seen substantial growth. Additionally, California Water is engaged in the ongoing 2024 California General Rate Case process, which will influence future capital expenditures. The company also announced an annual dividend increase, reflecting its commitment to returning value to shareholders. Despite these positive developments, the company's stock experienced a decline, suggesting potential investor concerns about future growth or market conditions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.