American Water Works Advances Growth Strategy with Acquisition and Rate Approval

American Water Works has announced two significant developments aimed at bolstering its operational footprint and revenue base. The utility giant is moving forward with a planned acquisition in New Jersey while securing a substantial rate increase for its Kentucky subsidiary. These strategic moves present a mix of immediate and long-term financial benefits, arriving as the company's shares show signs of short-term technical pressure.

In a key regulatory decision, the Kentucky Public Service Commission has granted Kentucky American Water an annualized revenue increase of $18.2 million. This adjustment became effective December 16, 2025, and replaces the previous Qualified Infrastructure Program rider. The commission authorized a return on equity (ROE) of 9.70%, based on a rate base of $667.0 million and a capital structure consisting of 52.26% common equity. The approved rate order also accounts for more than $212 million in capital investments made by the subsidiary between February 2025 and December 2026, providing a near-term uplift to earnings.

Strategic Acquisition Expands New Jersey Footprint

Concurrently, the company's New Jersey American Water unit has agreed to purchase the municipal water system of Hopewell Borough for $6.4 million. The deal, which followed a November 2025 referendum where 58% of voters approved the sale, will add approximately 880 customer connections to its network. Completion, anticipated in the first half of 2026, remains subject to approval by the New Jersey Board of Public Utilities.

Should investors sell immediately? Or is it worth buying American Water Works?

Upon finalization, management has committed to an immediate $7 million investment program over the subsequent five years. Priority projects include the replacement of all lead service lines and galvanized connections by 2031, alongside the renewal of aging water mains.

Market Performance and Forward Considerations

Finishing Friday's session at €111.80, American Water Works shares declined 1.45%. The stock currently trades nearly 9.7% below its 52-week high, with its 14-day Relative Strength Index (RSI) at 26.7, indicating an oversold condition in the near term. Investors are now weighing the long-term value of the infrastructure commitment in New Jersey and the immediate revenue contribution from Kentucky against this weaker technical backdrop.

The outlook hinges on execution. The Kentucky rate decision provides an instant, annualized financial benefit. The New Jersey transaction's value realization depends on regulatory consent and the subsequent successful deployment of the promised capital investments. Whether these positive fundamental developments can counteract the recent share price weakness will largely be determined by the company's ability to follow through on its plans and navigate the regulatory process efficiently.