American Water Works (AWK 0.90%) is slated to release its fourth-quarter and full-year 2020 results either after the market close on Wednesday, Feb. 24, or before the market open on Thursday, Feb. 25.
The former date is more likely, as the water utility giant has traditionally released its results after market close and held its earnings call on the following morning. However, the press release for these events doesn't specify when results will be released.
What we know for sure is that American Water will hold a virtual investor day on Thursday, Feb. 25, at 9 a.m. EST. This event will combine the usual quarterly earnings call with the annual investor day. Of course, companies are holding their annual investor days virtually this year due to the COVID-19 pandemic.
On that topic, American Water supplies an essential product (potable water) and service (treating wastewater), so its business has held up well during the global health and economic crisis.
Thanks in part to this resiliency, shares returned 26.9% in 2020, compared to the S&P 500's 18.4% return. In 2021, American Water stock has returned 4.7% through Feb. 18, while the broader market has returned 4.4% over this period.
Here's what to watch in American Water's upcoming Q4 report.
Image source: Getty Images.
Key quarterly numbers
Here are American Water's results for the year-ago period and Wall Street's estimates to use as benchmarks.
|
Metric |
Q4 2019 Result |
Wall Street Q4 2020 Consensus Estimate |
Wall Street's Projected Change |
|---|---|---|---|
|
Revenue |
$902 million |
$975 million |
8.1% |
|
Adjusted earnings per share (EPS) |
$0.73 |
$0.80 |
9.6% |
Data sources: American Water Works and Yahoo! Finance.
In the first three quarters of 2020, the pandemic caused a decline in water demand from commercial and industrial customers, while having the opposite effect on demand from residential customers, many of whom have been home more often than usual. Investors can probably expect that this dynamic continued into the fourth quarter, though was likely somewhat less pronounced than early in the pandemic.
For context, in the third quarter, American Water's revenue rose 6.5% year over year to $1.08 billion, falling a bit short of the $1.1 billion that Wall Street had been expecting. Adjusted EPS increased 9.8% to $1.46, beating the consensus estimate of $1.38.
O&M efficiency ratio
Investors should continue to monitor American Water's adjusted operation and maintenance (O&M) efficiency ratio. This ratio, which is for the trailing-one-year period, reflects how well the company is controlling costs in its regulated business. The lower the number, the better.
Last quarter, this ratio was 34.2%, an improvement from 34.8% in the year-ago period. The company has been making steady progress in improving this ratio.
2021 guidance
American Water plans to issue full-year 2021 guidance on Feb. 25 during its combined earnings call/investor day. Traditionally, the company has provided an annual outlook for the bottom line, but not for the top line.
Currently, Wall Street is modeling for 2021 adjusted EPS of $4.23 on revenue of $4 billion.
Because the stock market looks ahead, investors can probably expect its reaction on Feb. 25 to hinge more on American Water's 2021 outlook than on its Q4 2020 results.
