"Investors have given up on the water industry -- the sector has fallen 60% -- but the best firms have hardly missed a beat," says utility sector specialist Roger Conrad.

In Personal Finance, the advisor reviews the outlook for the sector and two of his favorite stocks -- American Water Works (NYSE: AWK) and Aqua America (NYSE: WTR).

"The EPA stimates the US will have to spend $335 billion over the next decade to keep the taps turned on, given aging infrastructure and supply degradation.

Continue reading Utility expert taps into water stocks

Utility expert taps into water stocks originally appeared on BloggingStocks on Tue, 30 Jun 2009 13:00:00 EST. Please see our terms for use of feeds.

Analyst upgrades:

• Janney Montgomery upgraded Aqua America (NYSE: WTR) to Buy from Neutral on valuation, viewing the recent weakness as a buying opportunity. The firm has a $19 target on the stock.
• UBS upgraded Gildan Activewear (NYSE: GIL) to Buy from Neutral due to customer Broder's improved liquidity and the improved outlook for margins.
• RBC Capital upgraded State Street (NYSE: STT) to Top Pick from Outperform and raised its target to $55 from $40. The analyst said the $2B capital raise addresses TCE ratio concerns and large unrealized losses in the investment portfolio.
• Sherwin-Williams (NYSE: SHW) was upgraded to Overweight from Neutral at JP Morgan.
• Advance Auto Parts (NYSE: AAP) was upgraded to Buy from Underperform at Banc of America/Merrill.
• M&T Bank (NYSE: MTB) was upgraded to Outperform from Market Perform at Bernstein.

Continue reading Analyst upgrades, downgrades and initiations: WTR, GIL, STT, EHTH, AKZOY, MEOH, UTHR and HGG

Analyst upgrades, downgrades and initiations: WTR, GIL, STT, EHTH, AKZOY, MEOH, UTHR and HGG originally appeared on BloggingStocks on Tue, 19 May 2009 11:00:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY: Georgia Gulf, Sohu.com and I-flow were today's noteworthy downgrades:

• Citigroup downgraded Georgia Gulf (NYSE: GGC) to Sell from Hold to reflect the deteriorating fundamentals in North American housing, and their belief that the company is increasingly likely to break its debt covenant ratio.
  
• Deutsche Bank downgraded shares of Sohu.com (NASDAQ: SOHU) to Hold from Buy on valuation and expects 2009 growth to be modest.
  
• Piper cut I-Flow (NASDAQ: IFLO) to Sell from Neutral following the weak Q1 report and guidance.

OTHER DOWNGRADES:

• Morgan Stanley downgraded Coca-Cola Femsa (NYSE: KOF) to Equal Weight from Overweight.
  
• Goldman removed Teva Pharma (NASDAQ: TEVA) from its Conviction Buy List.
  
• Aqua America (NYSE: WTR) was cut to Market Perform from Outperform at Wachovia.
  
• JP Morgan lowered PetroChina (NYSE: PTR) to Underweight from Neutral.

Analyst downgrades: Georgia Gulf, Sohu.com, I-Flow originally appeared on BloggingStocks on Wed, 07 May 2008 12:30:00 EST. Please see our terms for use of feeds.

Water utilities are hardly a high-flying investment, but some may be worth a second look. According to EPA estimates, American municipalities will need to spend $500 billion over the next 15 years to upgrade and expand their aging water infrastructure, money most municipalities do not have. Enter privately owned waterworks, including Aqua America (NYSE: WTR) and American Water, currently in the process of being sold by RWE AG in an IPO valued between $4-6 billion. Aqua America currently owns 10,000 miles of pipes in 13 states. The company has a market cap of $3 billion, and recently posted 1Q 2007 earnings of 13 cents per share, just shy of the estimated 14 cents per share. Revenues were up for the quarter 16.5% to $137.3 million. The company also announced a small increase in its quarterly dividend, to 11.5 cents per share.

Aqua America, like its closest competitor American Water, grows primarily through acquisition of smaller water works that can no longer compete on economy of scale. Aqua America has acquired 25 to 30 smaller water companies each year for the past five years. When American Water is finally spun off from its German owner, it will be flush with cash and ready to acquire. The company currently serves 18 million residents in 29 states, and will only get larger. 85% of Americans receive their water via municipal systems, many of which will be prime targets for acquisition.

Investing in waterworks requires an understanding of an unusual business model. Municipalities must agree to sell their waterworks. Scenarios in which municipalities continue to own but contract out waterworks operations are low profit margin deals. Given the impending large bills municipalities will face, they will be more inclined to outright sell to large private waterworks. Once a private waterworks acquires a municipal system, it must spend on upgrades first, then seek to recoup upgrade costs in addition to interest on debt. Much of the debt can be borrowed tax free or tax reduced through municipal borrowing authorities. Typically, a waterworks company spends $3.45 upfront for each $1 in revenue. This is more than twice the cost electrical utilities incur to generate revenue. Private waterworks are also guaranteed a "reasonable" rate of return on equity, generally 10-11%, as part of the acquisition deal.

Continue reading Water utilities -- Don't flush this investment

Water utilities -- Don't flush this investment originally appeared on BloggingStocks on Sun, 13 May 2007 09:40:00 EST. Please see our terms for use of feeds.