Sharecast - Pennon was cut to ‘sector perform’ from ‘outperform’ and the target price maintained at 975p as RBC said the valuation was now more balanced.
"Pennon continues to focus on its environmental performance as the market awaits the outcome of the ongoing investigation," it said.
"We believe the business will continue to be one of the top RoRE performers in the sector, however we downgrade to sector perform on valuation as PNN has recovered some of its underperformance versus peers."
The bank also downgraded Severn Trent (LON:SVT) to ‘sector perform’ from ‘outperform’, lifting the price target to 3,000p from 2,900p, as it said there was less potential for upside at current levels.
"We like SVT as a business and believe that growth coupled with a strong focus on ODIs and the 4* EPA status will position the company well into AMP8," it said.
However, the bank has downgraded the shares "following a recovery in the share price and a lack of visible near-term catalysts".
