AWK's Unit Expands With the Acquisition of Yerba Buena Water Company

American Water Works Company, Inc. AWK announced that its unit, California American Water, acquired Yerba Buena Water Company. The company added nearly 250 customers through the acquisition of Yerba Buena’s water system. 

California American Water has been quite active in expanding its operations through an inorganic route. The current acquisition marks the ninth acquisition for California American Water since 2020, which has added 13,000 new customers.

California American Water will make essential investments in the acquired assets and provide high-quality services to the new customers.

Consolidation Needed in Fragmented Water Industry

The U.S. water industry remains deeply fragmented, with more than 50,000 community water systems and 14,000 wastewater treatment facilities. Many smaller providers operate under financial constraints that hinder infrastructure upgrades, leading to inefficiencies and wastage of potable water.

While consolidation through mergers and acquisitions has been slow, it is vital for improving service quality, reducing operating costs and enabling larger-scale infrastructure investments.

American Water Works has been quite active in acquisitions. The company has completed 12 acquisitions in five states as of Oct. 29, 2025, adding 17,500 new customers. The pending 22 acquisitions (as of Oct. 29, 2025), when completed, will add another 60,100 customers to its customer base. The company remains committed to expanding its business through inorganic and organic means. American Water Works continues to focus on the acquisition of utilities that provide services to 5,000-50,000 customers.

Aging Water Industry Needs Investment in Infrastructure

Water utilities in the United States oversee a vast network of nearly 2.2 million miles of aging pipelines. A substantial portion of the water infrastructure is nearing the end of its effective service life and requires upgrades and replacements.

The Environmental Protection Agency estimates that $1.25 trillion in investments will be needed over the next 20 years to maintain and upgrade drinking water, wastewater and stormwater systems.

Essential Utilities WTRG has been investing consistently to upgrade its infrastructure. WTRG’s long-term plan is to invest $7.8 billion from 2025 to 2029 to rehabilitate and strengthen its water and natural gas pipeline systems. It is able to reduce regulatory lag and facilitate growth through strategic acquisitions. The company recently entered into a merger agreement with American Water Works.

American States Water Company AWR, along with its subsidiaries, provides water, wastewater and electric services to its customers. AWR provides long-term water and wastewater services to military bases and continues to pursue new long-term contracts from more military bases. It aims to invest $180-$210 million in 2025 to upgrade its infrastructure.

Middlesex Water Company MSEX is also making systematic investments to upgrade its infrastructure. MSEX plans to invest $387 million in the 2025-2027 period to install new treatment at its Carl J. Olsen surface water treatment plant, install hydrants and meters, and perform various water main and services replacements and improvements.

Price Movement of AWK

Over the year to date, AWK’s shares have risen 3.0%, which lagged the industry’s growth of 14.3%.

Zacks Rank

AWK currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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

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