Essential Utilities, Inc. (NYSE: WTRG) has strengthened its wastewater business by acquiring Lower Makefield Township’s wastewater system. The acquisition, valued at $53 million, was accomplished through Essential Utilities’ subsidiary, Aqua Pennsylvania, Inc.
Shares of this regulated utility increased 3.3% on Friday, ending the trading session at $48.80.
Essential Utilities provides water, natural gas, and wastewater. It has operations across multiple U.S. states, including North Carolina, Virginia, Pennsylvania, Illinois, Texas, New Jersey, Ohio, and Indiana. Its headquarter is located in Bryn Mawr, PA.
Rationale Behind the Buyout
The acquired business has a strong presence across multiple townships, including Falls, Lower Makefield, and Middletown. It also offers services in Yardley Borough, which is located in Bucks County, PA. Customer connections of the acquired business are approximately 11,000.
The buyout is anticipated to strengthen Aqua Pennsylvania’s existing wastewater business and its customer connections.
Aqua Pennsylvania is among the largest operating units of Essential Utilities. The subsidiary generated revenues of $537.4 million in 2021, accounting for 55% of Essential Utilities’ Regulated Water segment’s revenues in the year. Aqua Pennsylvania has 1.5 million customers, spread across 32 countries in the Commonwealth of Pennsylvania.
Official Comments
Essential Utilities’ Chairman and CEO, Christopher Franklin, said, “We are proud to be part of the wastewater solution in the communities we serve and are pleased to welcome the customers of Lower Makefield wastewater system to those we serve.”
Also, the President of Aqua Pennsylvania, Marc Lucca, said, “The Aqua Pennsylvania team and I are committed to delivering excellent customer service to the residents of Lower Makefield Township and are already hard at work preparing to provide quality wastewater services to the community. Our plans include investing $10 million in infrastructure improvements to the wastewater system in the first 10 years, which will improve services and avoid the environment impact from sanitary sewer overflows.”
Other Buyouts/Signed Deals
Essential Utilities has been purchasing businesses to strengthen its portfolio and expand its customer base. In 2021, it invested $36.3 million in purchasing utility systems.
So far in 2022, Essential Utilities’ subsidiary Aqua Texas has agreed to purchase the distribution system and water treatment businesses of the Freestone County-based Southern Oaks Water System.
Including the Oaks Water deal, Essential Utilities is due to complete eight buyout transactions. This information was communicated last month along with the company’s fourth-quarter results.
Stock Rating
Recently, Ben Kallo, an analyst at Robert W. Baird maintained a Buy recommendation on Essential Utilities and a price target of $53 (8.61% upside potential).
Wall Street is unanimously optimistic about Essential Utilities’ growth opportunities and has a Strong Buy consensus rating based on 4 Buys and 1 Hold. The average WTRG price target of $52 suggests 6.56% upside potential from current levels. Over the past year, shares of Essential Utilities have increased 19.6%.
Hedge Fund Activity
According to the TipRanks Hedge Fund Trading tool, the activities of two hedge funds suggest that confidence is Positive for Essential Utilities. Holdings in Essential Utilities have increased 13.2 thousand in the last quarter.
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