American Water's Unit Buys Water Assets of South Orange Village

American Water Works Company’s (AWK) subsidiary, New Jersey American Water, has announced the acquisition of the water system of South Orange Village for $19.7 million. This acquisition will add 5,000 consumers to its existing customer base.

New Jersey American Water plans to invest $50 million in upgrades to the South Orange Village’s water system over the period of next 10 years and provide quality services to the customers in the region.

Fragmented and Aging Water Industry Needs Investment

The U.S. water industry remains highly fragmented, with more than 50,000 community water and 14,000 wastewater treatment systems. Many smaller utilities lack the financial resources to upgrade aging infrastructure, leading to operational inefficiencies and water loss. Acquisitions by larger players having more financial capabilities will lead to the modernization of smaller old systems and customers will get better services.

The U.S. water and wastewater infrastructure is deteriorating, with water main breaks occurring every two minutes, according to the American Society of Civil Engineers. The Environmental Protection Agency estimates that $1.25 trillion in investments will be needed in the next 20 years to maintain and expand water services.

Utilities Are Consolidating to Expand Quality Services

American Water is quite active in making strategic acquisitions and necessary investments in upgrading the acquired assets. AWK completed six acquisitions in three states as of July 31, 2025. The pending 20 acquisitions (as of July 31, 2025), when completed, will add another 40,650 consumers to its customer base.

California Water Service Group (CWT) makes strategic acquisitions to expand its operations and necessary investments to upgrade the acquired assets to provide high-quality services to an expanding customer base and emergency firefighting requirements.

The company’s strategic acquisitions target new markets in high-growth regions. California Water Service Group’s subsidiary, California Water Service, recently signed an agreement with an affiliate of DMB Development to own and operate the wastewater and recycled water systems of Silverwood.

Essential Utilities (WTRG) is pursuing acquisitions as part of its growth strategy. The company has signed purchase agreements for additional water and wastewater systems in Pennsylvania, Texas and Ohio that are pending closing and expected to serve more than 200,000 equivalent retail customers.

Year to date, Essential Utilities has expanded its footprint with three acquisitions — the Village of Midvale’s water system (1,000 customers for $3 million) in Ohio, Greenville Sanitary Authority’s wastewater assets (2,300 customers for $18 million) and Beaver Falls’ wastewater system (7,000 customers for $37.8 million) both in Pennsylvania.

AWK Stock’s Price Performance

In the past year, shares of the company have risen 3.4% compared with the industry’s 9.9% growth.

Image Source: Zacks Investment Research

AWK’s Zacks Rank & Another Stock to Consider

American Water currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the same industry, holding a Zacks Rank #2 (Buy), is Consolidated Water (CWCO). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for CWCO’s 2025 and 2026 earnings per share moved up by 0.89% and 43.07%, respectively, year over year. CWCO reported positive earnings surprise in the last four reported quarters, resulting in an average of 40.05%.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research