Tracking with the S&P 500's 20.6% decline through the first six months of 2022, shares of American States Water (AWR -0.88%) plunged 21.2%, according to data provided by S&P Global Market Intelligence.
During periods of significant market volatility, investors will often seek conservative investments like water utilities -- such as American States Water -- as a way to fortify their portfolios. It seems, however, that the company's inability to meet analysts' expectations regarding its fourth-quarter 2021 earnings report and first-quarter 2022 earnings report plus some bearish outlooks from Wall Street overshadowed the stock's allure as a safe haven investment.
In late February, American States Water reported Q4 2021 earnings, including sales of $117 million and earnings per share (EPS) of $0.55. The mixed results failed to meet expectations as the lone analyst who had forecast what the company would report surmised that American States Water would book $126 million on the top line and EPS of $0.46. Nonetheless, the market took note, and the stock closed 2% lower than where it had closed on the day before the announcement.
A comparable miss occurred with the company's Q1 2022 earnings report. Whereas one analyst had projected that American States Water would report revenue of $122 million and EPS of $0.53, the company reported $109 million and $0.47 on the top and bottom lines, respectively.
Two downward revisions in analysts' price targets represented additional factors leading investors to sell off shares over the past six months. In early February, Eric Beaumont, an analyst at Barclays, reduced the price target on American States Water's stock to $86 from $96 while maintaining an underweight rating. A couple of weeks later, Jonathan Reeder, an analyst at Wells Fargo, also reduced the price target to $86 (though it had originally been at $94) and kept an underweight rating on the stock.
With American States Water failing to report anything so ruinous to its prospects that a 21% decline would seem warranted, the decline in the utility stock is more a reaction to the company's inability to meet one analyst's expectations and a couple of price target cuts. This hardly seems reasonable, however. Oftentimes, Wall Street has shorter investing horizons than the long-term holding periods that we favor, so price targets should be taken with a grain or two of salt.
Despite the stock's recent slide, smart investors looking for a way to buttress their portfolio would be wise to consider American States Water -- a company that has long demonstrated an interest in rewarding shareholders.