Let's dive in and take a look at the numbers. Quarterly net income dropped 3% to $24.9 million from the corresponding quarter of 2006, although diluted earnings per share were flat at $0.19. Revenue did rise 9% in the quarter, which indicates that margins declined as operating and maintenance costs rose substantially from the prior year (total costs rose 19% over Q4 2006). Despite the housing slowdown and a $2.4 million write-off from an abandoned legal effort to increase rates in Florida, Aqua America managed a 13% increase in revenue for the full-year 2007, and a 3% rise in net income.
Looking forward, Aqua America is continuing with the same corporate strategy that made it America's largest publicly traded water utility. The company seeks growth through acquisitions of water systems across the country, including drinking water services and septic services. The resulting economy of scale should give it a competitive advantage in completing inevitable upgrades to the nation's water systems over the coming years. After a $238 million investment in infrastructure in 2007, the company plans to spend $250 million in 2008. In turn, these investments significantly strengthen Aqua's petitions for higher rates, like the $67 million in annualized rate increases that are currently pending.
It takes a particular type of investor to stay long with Aqua America, one who is content to watch gains accumulate one drop at a time. This Fool perceives deep value in the company's long-term strategy of growth through acquisitions, investment in infrastructure, and the recovery of cost increases and investments through rate increases.
Furthermore, while virtually every other commodity has seen enormous price surges of late, water has lagged this trend considerably. Over the past year, shares of Aqua America have dropped 10%, while those of the PowerShares Water Resources ETF