Sarah Lester, an analyst from Morgan Stanley, maintained the Buy rating on United Utilities (UU – Research Report). The associated price target is p1,300.00.
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Sarah Lester’s rating is based on several factors that suggest a positive outlook for United Utilities. The company’s initial guidance for FY26 indicates potential for upward pressure on consensus net income, with expectations of an 8% increase above consensus estimates. This is primarily due to lower operating expenses and a nil tax charge, contrasting with the consensus expectation of a 7% tax rate.
Additionally, United Utilities has set an ambitious outperformance target for the new regulatory period, aiming for a return on regulated equity of at least 8.2% in nominal terms. While the company anticipates being in penalty territory for customer outcome delivery incentives in the first year, it expects performance improvements moving forward. These factors contribute to a favorable investment outlook, justifying the Buy rating.