Proactive Investors - Pennon Group PLC (LON:PNN) and Severn Trent PLC (LON:SVT) suffered share price target downgrades on Monday in light of a “challenging” backdrop for UK utilities, Deutsche Bank (ETR:DBKGn) analysts said.
Deutsche lowered Pennon’s share price target from 840p to 780p, up 1.6% on Monday’s close, while Severn Trent’s was slashed from 3,000p to 2,850p, a prospective 4% rise.
Despite lower profit and revenue in the year to March, United Utilities Group PLC (LON:UU)'s late-May results were “better than expected,” according to Deutsche, which retained the firms’ ‘hold’ rating.
“For United Utilities this is potentially an intriguing entry point given its long-term growth potential,” the bank noted.
Severn Trent and Pennon penned earnings in line with, and lower than expectations respectively meanwhile, analysts added, with both also seeing repeated ‘hold’ ratings.
“We still feel that the near-term backdrop for the sector overall is challenging,” with Ofwat’s 2024 price review likely “to be tough” in pushing water firms to implement climate policies.
An “anticipated 2024 election” could place further pressure on utilities, Deutsche anticipated, given “the media storm over storm overflows [and] regulatory investigations”.