Water Investment Ideas

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>>> Primo Water (PRMW) Unit Acquires Crystal Spring Water Company


Zacks Equity Research

October 14, 2022


https://finance.yahoo.com/news/primo-water-prmw-unit-acquires-151803695.html


Primo Water Corporation PRMW has announced that its subsidiary, Primo Water North America ("PWNA"), has acquired substantially all assets of Crystal Spring Water Company, a bottled water company based in Rhode Island. This acquisition will add 2,500 customers to PWNA’s existing customer base and further expand its operations in the Northeast region.

Crystal Spring Water Company provides high-quality spring water solutions and delivers superior customer service, which is in sync with Primo Water’s objective to provide high-quality water services and solutions to its customers.

Primo Water has been expanding internationally through strategic acquisitions. Recently, its subsidiary Primo Water Europe acquired Eureau Sources and Defeaus, two France-based companies specializing in the marketing and packaging of spring water.

Acquisition Essential for Fragmented Industry

Per the Environmental Protection Agency, at present, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. Due to a large number of small operators in the industry and a lack of adequate funds, at times, essential upgrades and repairs of infrastructure get delayed.

The acquisition of small units by larger utilities ensures necessary investments for the upgrade of infrastructure and the continuation of high-quality services for customers.

Water utilities like American Water Works AWK, SJW Group SJW and Essential Utilities WTRG, among others in the water utility space, are expanding operations through systematic acquisitions.

American Water Works continues to focus on the acquisition of utilities that provide services to 5,000-50,000 customers. Through nine buyouts, the company added 51,000 customers to its existing customer base. Its pending acquisitions (as of Jun 30, 2022), when completed, will add another 29,200 customers to its base. Its long-term (three to five year) earnings growth is currently pegged at 8.08%.

The Zacks Consensus Estimate for American Water Works 's 2022 and 2023 earnings implies year-over-year growth of 4.5% and 8.8%, respectively. It currently has a Zacks Rank #3 (Hold).

SJW Group completed more than 25 acquisitions in the 2010-2021 time frame and expanded operations. In January 2022, it closed the acquisition of Texas Country Water in Comal, TX. The deal added more than 1,900 water and wastewater customers to the existing customer base. This has been the fourth Texas acquisition by SJW Group in the past 12 months. In the next five years, the company plans to invest $1.5 billion to further strengthen its infrastructure.

The Zacks Consensus Estimate for SJW Group's 2022 and 2023 earnings implies year-over-year growth of 15.3% and 9%, respectively. It currently has a Zacks Rank #3.

In the six years ended Dec 31, 2021, Essential Utilities expanded utility operations by completing many water and wastewater acquisitions, which, in turn, added 94,000 customers. In the first quarter of 2022, the company completed one buyout, which added 11,000 customers. It plans to invest $3 billion from 2022 through 2024 to fortify operations and efficiently serve its expanding customer base.

Essential Utilities’ long-term earnings growth is currently pegged at 6.2%. The Zacks Consensus Estimate for WTRG's 2022 and 2023 earnings implies year-over-year growth of 6.6% and 6.7%, respectively. It currently has a Zacks Rank #2 (Buy).

Price Performance

Shares of PRMW have gained 5.5% in the past three months against the industry’s 6.7% decline.

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