Aqua America shares drop after 1Q miss, analyst downgrade
NEW YORK—Shares of Aqua America Inc. fell Wednesday morning after the water and sewage utility posted first-quarter profit below Wall Street's expectations and an analyst slashed his rating.
The stock fell 57 cents, or 3.2 percent, to $17.42. Earlier in the session shares hit a three-year low of $17.25.
Wachovia Capital Markets analyst Neil Kalton cut his rating on the Bryn Mawr, Pa., company to "Market Perform" from "Outperform."
A 10 percent earnings growth target no longer seems feasible, Kalton said, after the company's "extraordinary" growth over the past decade, he said.
A 5 percent to 7 percent growth rate seems more "realistic," he said.
"We believe Aqua America will continue to lead the consolidation process in this extremely fragmented and municipally dominated industry," Kalton said in a note to clients.
Aqua America -- one of the largest water utilities in the nation -- has capitalized on a recent trend among municipalities to sell or lease their water infrastructures for cash to fill budget holes.
Brean, Murray, Carret & Co. analyst Michael E. Gaugler remains bullish on the company's long-term prospects and expects the rest of 2008 and 2009 to be better.
Gaugler kept a "Buy" rating but cut his price target to $25 from $28, implying he expects shares to rise about 39 percent over Tuesday's $17.99 close.
For 2008, he cut his earnings outlook to 71 cents per share from 81 cents per share. Analysts polled by Thomson Financial expect, on average, earnings of 81 cents per share.
