Consolidated Water (CWCO) Rides On Acquisitions & Expansion
Zacks Investment Research | Jun 14, 2017 09:04PM ET
Consolidated Water Co. (NASDAQ:CWCO) is benefiting from acquisitions and expansion of operations in regions having significant demand for potable water. However, like other water utilities, its performance could be adversely impacted by weather variations and risk of contamination of water sources.
The company is gaining from its acquisition-driven growth strategy. Consistent with this, last year, it acquired 51% interest in Aerex Industries, Inc., a U.S. original equipment manufacturer and service provider of a wide range of products and services applicable to municipal water and industrial water treatment. The full-quarter contribution from the acquired Aerex assets boosted revenues from its Manufacturing segment in the first quarter of 2017 compared with the year-ago quarter.
Other water utilities like American Water Works Company, Inc. (NYSE:AWK) and Aqua America Inc. (NYSE:WTR) are also making strategic acquisitions to expand their operation.
In addition to finding new markets to further expand its drinking water and wastewater services, the company is also working relentlessly to expand its existing operations in the Cayman Islands, The Bahamas and Belize. The new project, which is coming up in Mexico, will also help to boost its performance.
The demand for water services fluctuates with weather conditions and level of tourism. Traditionally, the company sells more water during the first and second quarters of the year – when the number of tourists is greater and local rainfall is less in its service territories – compared with the third and fourth quarters. However, a reduction in tourist count or greater-than-expected rainfall in the locations in the first and second quarter could critically affect its revenues, cash flows and results of operations.
Like other water utilities, despite taking safety measures, there is always a risk of contamination of its processed water that may result in disruption of its services and adversely affect its revenues.
Price Movement
Shares of Consolidated Water Co. returned higher than the Zacks categorized broader industry in the last six months. The company’s shares gained 18.3% while the Zacks categorized Zacks Investment Research
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