Consolidated Water CWCO benefits from advanced technology, strategic acquisitions and expansion of operation. However, fall in water demand due to outbreak of COVID-19, and decline in tourism are concerns.

This Zacks Rank #3 (Hold) stock delivered an earnings surprise of 16.11%, on average, in the last four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

Consolidated Water utilizes the Reverse Osmosis Technology to convert seawater to potable water at all water treatment plants it constructs and operates. It has 11 desalination plants in operation in California and aims to add 10 more to meet the increasing demand.

The company focuses on the expansion of operations in areas where there is limited supply of freshwater. It operates 11 plants in four countries, and is expanding in new markets for drinking water as well as wastewater services. The company focuses on opportunities to enter into new water-supply agreements, renew existing supply agreements and increase fresh water production level in new markets.

It is actively exploring opportunities to expand operations through joint ventures, strategic alliances and acquisitions. The company acquired full interest in Aerex Industries, Inc. and also took over 51% of PERC Water Corporation, thereby expanding its product portfolio. Another water utility, American Water Works AWK is expanding the customer base through organic initiatives and acquisitions. From the start of the year till May 1, 2021, the company expanded the customer base by 4,500 through organic means and acquisitions.

Another utility company, California Water CWT announced the acquisitions of Skylonda, Keahou and Animas Valley to expand operations. Essential Utilities WTRG expects the water and wastewater customer base to increase 2-3% year over year in 2021 through acquisitions, along with organic means.

Headwinds

Consolidated Water’s operations could be negatively impacted by the fluctuating demand of water services related to weather, which in turn might affect the profitability of the company.

In this adverse economic condition caused by the COVID-19 outbreak, reduction in tourism in its service territories, loss of one or more large industrial or commercial customers might adversely impact on company’s consolidated financial condition. Moreover, delay in collection of outstanding accounts receivables and failure to collect receivable could affect performance.

Price Performance

Consolidated Water’s shares have returned 5.1% in the past six months, outperforming the industry’s 1.8% growth.

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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report

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