Zacks Industry Outlook Highlights American Water Works, Essential Utilities and American States Water

For Immediate ReleaseChicago, IL – November 25, 2025 – Today, Zacks Equity Research discusses American Water Works Co. AWK, Essential Utilities Inc. WTRG and American States Water Co. AWR.Industry: Water UtilityLink: https://www.zacks.com/commentary/2794479/3-stocks-to-watch-from-the-thriving-water-supply-industryThe companies under the Zacks Utility - Water Supply industry work around the clock to provide a reliable supply of clean drinking water and efficient sewer services to millions of people across the United States, essential resources for safeguarding public health and sanitation. Typically, water usage declines in the winter months as colder weather reduces outdoor consumption. Conversely, demand rises during the summer, driven by higher temperatures and increased outdoor activities.The aging of pipelines is concerning, but water utilities continue with their upgrade and maintenance projects to minimize disruptions in operations. American Water Works Co., with its widespread operations, provides services to domestic customers and military bases and offers an excellent opportunity to stay invested in the water utility space. Other water utilities worth adding to your portfolio are Essential Utilities Inc. and American States Water Co.About the Utility-Water Supply IndustryThe Zacks Utility - Water Supply industry consists of companies that provide drinking water and wastewater services to residential, commercial, industrial and military customers. Water utilities oversee a vast network of nearly 2.2 million miles of aging pipelines. To ensure reliability and expand service, operators continually replace old infrastructure and invest in new pipeline systems. They also manage storage tanks, treatment plants and desalination facilities to meet growing demand.Although highly fragmented, the sector benefits from greater water efficiency across households and industries, promoting sustainable use. As capital-intensive businesses, water utilities gain from lower interest rates, which reduce financing costs and support continued infrastructure investment.Three Trends Shaping the Future of the Water Supply IndustryInterest Rate Declines Support Long-Term Investment: Water utilities, which rely heavily on debt to finance infrastructure improvements and expansion, are well-positioned to benefit from the latest interest rate cuts. After raising the benchmark rate to 5.25%-5.50%, the Federal Reserve has now reduced it to 3.75%-4.00%. This decline lowers financing costs, giving utilities a favorable environment to pursue large-scale infrastructure projects. With more rate reductions anticipated in 2026, capital servicing expenses are expected to fall further, enhancing the performance of these capital-intensive companies.Consolidation in a Fragmented Industry: The U.S. water industry remains deeply fragmented, with over 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. Increasingly, major players are acquiring smaller systems to modernize operations and extend their service reach.Aging Infrastructure Requires Investments: The U.S. water and wastewater infrastructure is deteriorating, with water main breaks occurring every few minutes, according to the American Society of Civil Engineers (ASCE). 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.The Bipartisan Infrastructure Law has committed $50 billion toward improving these systems, especially in underserved communities. ASCE currently rates U.S. drinking water infrastructure at C- and wastewater systems at D+, underscoring the urgent need for upgrades. The regulated water utilities are making investments to upgrade and maintain infrastructure. Still, a significant gap exists between the investment made and needed to upgrade the aging infrastructure.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Utility Water Supply industry is a 10-stock group within the broader Zacks Utilities sector. The industry currently carries a Zacks Industry Rank #97, which places it in the top 40% of more than 243 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish prospects for the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth. The recent earnings estimate of $2.27 for the water supply industry indicates year-over-year growth of 7.1%.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation.Water Supply Industry Underperforms Sector and S&P 500The Zacks Utility Water Supply industry has underperformed the Zacks S&P 500 composite and its sector in the past 12 months. The industry has gained 6.1% compared with the Zacks Utilities sector’s rally of 12.5%. The Zacks S&P 500 composite has advanced 12.4% in the same time frame.Industry Trading at a Discount to Sector & S&P 500On the basis of the trailing 12-month enterprise value to EBITDA (EV/EBITDA), which is a commonly used multiple for valuing water utility stocks, the industry is currently trading at 15.89X compared with the S&P 500’s 17.94X and the sector’s trailing 12-month EV/EBITDA of 15.92X.Over the past five years, the water supply industry has traded as high as 25.69X, as low as 9.21X and at the median of 17.16X.3 Water Utility Industry Stocks to Watch NowWe have discussed three stocks from the Zacks Utility- Water Supply industry with strong growth potential, one currently carrying a Zacks Rank #2 (Buy) and the other two having a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.American States Water Co.: San Dimas, CA-based American States Water, 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 in the range of $180-$210 million in 2025 to upgrade its infrastructure, and it is expected that the company will continue to make fresh investments to upgrade and expand operations.Over the past 90 days, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved up by nearly 1.2% and 0.3%, respectively. The company’s long-term (three to five years) earnings growth rate is 5.65%. The current dividend yield is 2.75%. It currently has a Zacks Rank #2.American Water Works Co.: Camden, NJ-based American Water, along with its subsidiaries, provides water and wastewater services to millions of Americans. The company continues to expand operations through acquisitions and organic means. American Water Works plans to invest $3.3 billion in 2025 to strengthen and expand its existing infrastructure. AWK aims to invest in the range of $19-$20 billion during the 2026-2030 period.Over the past 90 days, the Zacks Consensus Estimate for 2025 earnings has moved up by nearly 0.2%. The long-term earnings growth of the company is currently pegged at 6.77%. The current dividend yield of the company is 2.49%. The company delivered an average four-quarter surprise of 2.59%. The company currently has a Zacks Rank #3.Essential Utilities: The Bryn Mawr, PA-based company, along with its subsidiaries, provides water, wastewater and natural gas services to customers. 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.Over the past 90 days, the Zacks Consensus Estimate for 2025 earnings has remained unchanged, while the 2026 estimate moved up by 0.45%. The current dividend yield is 3.42%. Essential Utilities currently has a Zacks Rank #3.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>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 American Water Works Company, Inc. (AWK): Free Stock Analysis Report American States Water Company (AWR): Free Stock Analysis Report Essential Utilities Inc. (WTRG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks