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Investing.com - Jefferies lowered its price target on American Water (NYSE:AWK) to $117 from $122 on Monday while maintaining an Underperform rating on the water utility company’s stock.
The research firm slightly raised its 2025-2029 earnings per share compound annual growth rate to 7.4% from 7.3%, reflecting an approximate $0.03 per year increase from the Nexus Water Group acquisition for the years 2027-2029, net of $150 million premium financing.
Jefferies noted that mergers and acquisitions remain a strategic lever for American Water amid rising PFAS (per- and polyfluoroalkyl substances) costs, but sustaining growth would require $300-$400 million per year in fair market value deals.
The firm sees potential long-term upsides if American Water wins upcoming rate cases in Pennsylvania, New Jersey, and Missouri, where authorized return on equity currently lags behind its weighted 9.65% average.
Despite these potential positives, Jefferies stated that American Water’s current valuation "remains hard to defend without clearer structural progress," contributing to its decision to lower the price target while maintaining the Underperform rating.
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