The company has also delivered three consecutive positive earnings surprises, prompting analysts to raise their estimates. It is a Zacks #2 Rank (Buy).
Third Quarter Results
Third quarter earnings per share came in at 32 cents, beating the Zacks Consensus Estimate by 14%. It was a 28% increase over the same quarter in 2009.
Revenue growth was a stellar 14.9% due in part to hot and dry weather in the East, which led to increased customer usage.
Meanwhile, operating income increased 25.4% as the company was able to leverage its fixed costs.
Growth
Although the weak housing market will limit Aqua's organic growth, the company continues to deliver tuck-in acquisitions in order to grow its customer base.
The Zacks Consensus Estimate for 2010 is 91 cents, representing an 18% increase over 2009 EPS. The 2011 estimate is currently 97 cents, equating to 7% EPS growth.
Income
Aqua produces stable cash flows and has an excellent history of consistently paying a dividend. In fact, the company has paid a consecutive quarterly dividend for the last 65 years.
In August, the company announced it was raising its quarterly dividend by 6.9%. Since 2000, Aqua has raised it at a compound annual growth rate of 7.7%.
It currently yields 2.7%.
Valuation
Shares trade at 23.8x forward earnings, a premium to the industry average of 20.0x.
Aqua America, Inc. is the largest publicly-traded water utility in the U.S. serving approximately 3 million people. It is headquartered in Bryn Mawr, Pennsylvania and has a market cap of $3.2 billion.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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