Thursday, August 03, 2006

Water Industry pumping on all cylinders

2006 is going to be a banner year for the water industries. Major players are reporting earnings this week, and the future looks bright indeed. Previous posts have outlined the case for investing in the Palisades Water Index ETF (PHO), as well as some global water stocks with US listed ADRs. Several key players announced earnings on August 2 2006, to good reception. Taken as whole, the earnings outlook for the industry is good, however it is very important to be choosy when to comes to valuations.
  • Walter Industries (WLT), the less famous parent of Mueller Water Products (MWA) reported strong results. On August 2 2006, shares jumped up $5.16 (11.75%) for WLT, and $1.17 (7.63%) for MWA. Walter Industries is now an officially a stub company. Mueller Water Products has market cap of 3.64Billion. Walter Industries which owns the remaining 75% of Mueller Water Products is worth a mere $2.13B. So much for efficient markets.
  • Watts Water Technologies (WTS) shares also jumped. Up $5.16 (17.99%) on reports of massive earnings growth. Income from continuing operations for the first six months of 2006 increased by $11,245,000, or 43%, to $37,630,000, or $1.14 per share, compared to income from continuing operations for the first six months of 2005 of $26,385,000, or $0.80 per share.
  • Badger Meter (BMI) reported record sales for the second quarter, and which leading naturally to record sales and earnings for the first half of 2006. Earnings came under pressure from increases in the price of copper and zinc.
  • Aqua America (WTR), the US's largest publicly traded water utility beat analyst estimated by a penny, reporting 0.17 cents vs 0.16 cents. Most importantly the company's Board of Directors voted to increase the quarterly dividend by eight percent to $0.115 per share -- an annualized rate of $0.46 per share. This is the eighth consecutive year in which Aqua America has increased its dividend above the stated five percent target and the 16th dividend increase in 15 years.


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