The Zacks Utility - Water Supply industry includes companies that provide drinking water and wastewater services to industrial, commercial and residential customers, as well as numerous military bases across the country.

A constant flow of clean water and reliable sanitation services are necessary for a healthy, hygienic life, and water utilities perform the critical daily tasks of meeting the growing drinking water needs of millions of Americans. Utility operators own storage tanks, treatment and desalination facilities to provide continuous potable water to all types of customers.

Water utility operators own nearly 2.2 million miles of pipelines that are getting old. Utilities continuously replace old pipelines and add new ones to expand operations. Per the U.S. Environmental Protection Agency, an estimated $963 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

To maintain, modernize and expand their operations, utilities are turning to capital markets for loans. The Fed has already reduced its fund rate by a cumulative 75 basis points since September 2024. One more rate decline is expected in December 2024, when the Fed members are scheduled to meet again. Capital-intensive utilities should have better prospects due to the rate decline. This is because their capital servicing costs will decrease, increasing margins and profitability.

In this article, we have run a comparative analysis of two Zacks Utility - Water Supply companies — Middlesex Water Company MSEX and SJW Group SJW — to decide which one is a better pick for your portfolio.

Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Middlesex Water has a market capitalization of $1.06 billion, while SJW Group has $1.81 billion.

MSEX & SJW’s Growth Projections

The Zacks Consensus Estimate for Middlesex Water’s 2024 earnings is pinned at $2.34 per share on revenues of $186 million. This implies a year-over-year bottom-line increase of 33% and a top-line improvement of 11.9%.

The Zacks Consensus Estimate for SJW Group’s 2024 earnings is pegged at $2.75 per share on revenues of $715.2 million. This indicates year-over-year bottom and top-line growth of 2.6% and 6.7%, respectively.

MSEX & SJW Stock’s Price Performance

In the past six months, shares of MSEX and SJW have gained 16.9% and 4.1%, respectively. The industry also grew 4.1% in the same time frame.

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MSEX & SJW’s Debt Position

The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, Middlesex Water and SJW Group have a debt-to-capital of 44.79% and 57.1%, respectively, compared with the sector’s 59.34%.

The times interest earned (TIE) ratio for MSEX is 4.3, while the same for SJW is 2.4. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term interest obligations.

MSEX & SJW’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Middlesex Water is 2.29%, and that for SJW Group is 2.95% compared with the Zacks S&P 500 composite’s average of 1.18%.

Bottom Line

Both Middlesex Water and SJW Group are evenly matched and good picks for your portfolio. They are focused on providing water and wastewater services to customers and have the potential to improve further. However, our current choice is MSEX, given its better earnings, revenue growth, debt management and price performance than SJW.

 

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Middlesex Water Company (MSEX) : Free Stock Analysis Report

SJW Group (SJW) : Free Stock Analysis Report

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