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United Utilities (GB:UU)
LSE:UU
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United Utilities
(LSE:UU)
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Rating:72Outperform
Price Target:
1,544.00p
▲(14.80% Upside)
Action:UpgradedDate:12/07/25
United Utilities scores well due to its positive earnings call and strong technical indicators, suggesting stable momentum and growth potential. However, financial performance is hindered by high leverage and negative free cash flow, which are risks that need addressing. The valuation is fair, with an attractive dividend yield providing additional support.
Positive Factors
Regulated revenue model
Being a regulated monopoly with prices set via Ofwat periodic reviews gives United Utilities predictable, durable revenue and investment visibility across AMP cycles. This reduces competitive risk, supports long-term planning for infrastructure spend and provides stable cash flow generation for 2-6 months and beyond.
High operating margins and revenue growth
Very high gross margins and sustained revenue growth indicate structural operational efficiency in water treatment and distribution. Robust margins provide resilience to cost inflation and fund network maintenance and transformation projects, supporting stable profitability through regulatory cycles.
Strong operating cash and funding headroom
Solid operating cash performance combined with net debt-to-RCV at 60% shows disciplined financing and headroom within covenant-like ranges. This structural funding flexibility supports AMP8 investment commitments, large capex programmes and transformation projects without immediate refinancing stress.
Negative Factors
High leverage
A very high debt-to-equity ratio and low equity proportion increase financial vulnerability to interest rate moves or refinancing events. Over the medium term this constrains flexibility for extra investment, raises fixed charge burdens and amplifies cash flow volatility from regulatory or environmental shocks.
Negative free cash flow
Negative free cash flow and a FCF/net income ratio of -0.3 reflect heavy capex and cash outflows exceeding operating cash in periods. Structurally negative FCF heightens reliance on external financing for AMP cycles, limits buffer for penalties or affordability programmes, and pressures liquidity over time.
Regulatory and environmental uncertainty
Ongoing regulatory methodology shifts (EPA changes, ODI design, PFAS/pollution categorizations) and affordability policy uncertainty can alter allowed revenues or impose extra compliance spend. Such structural regulatory risk can change long-term cash returns and require higher investment or customer support.
United Utilities (UU) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£9.49B
Dividend Yield4.45%
Average Volume (3M)1.91M
Price to Earnings (P/E)23.6
Beta (1Y)0.43
Revenue Growth15.76%
EPS Growth254.82%
CountryUK
Employees6,000
SectorUtilities
Sector Strength65
IndustryRegulated Water
Share Statistics
EPS (TTM)0.53
Shares Outstanding681,888,400
10 Day Avg. Volume1,575,852
30 Day Avg. Volume1,906,953
Financial Highlights & Ratios
PEG Ratio-1.53
Price to Book (P/B)3.45
Price to Sales (P/S)3.64
P/FCF Ratio-373.61
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,400.00Price Target Upside4.09% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)1.02
Revenue Forecast (FY)£2.58B
United Utilities Business Overview & Revenue Model
Company DescriptionUnited Utilities Group PLC provides water and wastewater services in the United Kingdom. It is also involved in the renewable energy generation, corporate trustee, financing, and property management activities; and provision of consulting, and project management services. The company operates 42,000 kilometers of water pipes; and 78,000 km of wastewater pipes. United Utilities Group PLC was incorporated in 2008 and is based in Warrington, the United Kingdom.
How the Company Makes MoneyUnited Utilities generates revenue primarily through the provision of water and wastewater services to its residential and commercial customers. The company's revenue model is largely based on regulated tariffs set by Ofwat, the economic regulator for the water sector in England and Wales. Key revenue streams include charges for water supply, sewage services, and infrastructure development. Additionally, UU earns revenue from non-regulated activities such as consultancy services, environmental projects, and partnerships with other organizations, which can provide supplementary income. The company's financial performance is also influenced by investments in infrastructure improvements, operational efficiencies, and customer service enhancements, which can lead to increased customer satisfaction and reduced operational costs.
United Utilities Earnings Call Summary
Earnings Call Date:Nov 13, 2025
(Q2-2026)
| % Change Since: |
Next Earnings Date:May 21, 2026
Earnings Call Sentiment Neutral
The earnings call reflects a balanced outlook for United Utilities, with strong operational achievements and a stable financial position. However, challenges with regulatory ratings and the need for a national social tariff to address affordability were highlighted. The company is proactive in addressing these challenges and exploring growth opportunities through innovation and strategic engagements.Q2-2026 Updates
Positive Updates
Strong Cash Performance
United Utilities reported a strong cash performance despite increased bills, doubling the number of customers on affordability schemes and maintaining cash flow.
Leakage Reduction Success
The company achieved a leakage benefit this year alone that was larger than what was delivered in the last AMP, showcasing significant operational improvement.
Strong Balance Sheet
United Utilities reported a net debt to RCV gearing of 60%, comfortably within their 55% to 65% range, and highlighted flexibility with a Moody's Baa1 threshold at 68%.
Proactive Engagement with Regulators
The company is actively engaging with regulators on growth opportunities and new legislation, particularly with asset health improvements and environmental strategies.
Data Center Opportunities
United Utilities identified opportunities in supporting data centers, including innovative engineering solutions for water supply and storm water usage.
Negative Updates
Disappointment with EPA Rating
The company expressed disappointment with a 2-star EPA rating due to changes in methodology and definitions, including pollution from storms and power interruptions.
ODI Penalties
The company expects to be in a penalty position for ODIs this year, although it anticipates a net reward position over the AMP period.
Challenges with Regulatory Changes
The company faces uncertainties with potential changes in regulatory frameworks and methodologies, particularly concerning PFAS and pollution categorizations.
Concerns Over Affordability and Social Tariff
There was discussion around the need for a national social tariff to address affordability issues, an area where water lacks support compared to other sectors.
Company Guidance
In the recent call, United Utilities provided detailed guidance on their fiscal '26 interim results, highlighting several key metrics and future expectations. The company emphasized ongoing conversations with regulators about reopeners in AMP8 and potential growth opportunities, particularly in areas like asset health and data centers. They expect the upcoming white paper to bring recommendations for regulatory changes, with a focus on investor-friendly measures and a strategic policy statement for Ofwat and the EA. The firm is actively managing affordability, having doubled the number of customers on support schemes, and anticipates potential legislative developments like a national social tariff. Financially, United Utilities maintains a strong balance sheet with a net debt to RCV gearing of 60%, well within their 55% to 65% range, and they are confident in their funding for AMP8, despite uncertainties linked to possible reopeners. They also discussed the potential environmental super cycle and the implications of PFAS and housebuilding on future investments, while reaffirming their commitment to transformation projects to manage totex delivery effectively. The company guided for 100 basis points of outperformance, with a focus on financing, ODIs, and PCDs, and while they expect a net penalty in ODIs this year, they are confident in achieving a net reward position over the AMP period. Overall, United Utilities conveyed a positive outlook, emphasizing their preparedness for future regulatory and environmental challenges.United Utilities Financial Statement Overview
Summary
United Utilities demonstrates solid revenue growth and efficient cost management, but the high leverage and negative free cash flow pose potential risks. The company needs to focus on improving profitability and managing debt levels to enhance financial stability.Income Statement
United Utilities shows strong revenue growth with a substantial increase of 10% from the previous year. The gross profit margin has remained robust at approximately 93%, indicating efficient cost management. However, the net profit margin is modest at around 12.3%, suggesting room for improvement in overall profitability.75
Positive
Balance Sheet
The company's balance sheet reflects a high debt-to-equity ratio of 5.39, which indicates significant leverage and potential financial risk. The equity ratio stands at 11.9%, showing a relatively low proportion of equity financing. Return on equity is 13.2%, highlighting effective use of equity to generate income.65
Positive
Cash Flow
Operating cash flow is strong compared to net income, indicating good cash generation from operations. However, free cash flow is negative, raising concerns about cash outflows exceeding inflows. The free cash flow to net income ratio is -0.3, pointing to potential liquidity challenges.60
Neutral
| Breakdown | TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.37B | 2.15B | 1.95B | 1.82B | 1.81B | 1.86B |
| Gross Profit | 1.61B | 2.00B | 1.66B | 754.10M | 874.30M | 908.40M |
| EBITDA | 1.32B | 1.19B | 992.70M | 1.18B | 1.16B | 1.02B |
| Net Income | 401.60M | 264.70M | 126.90M | 204.90M | 453.40M | 106.80M |
Balance Sheet | ||||||
| Total Assets | 17.53B | 16.77B | 15.65B | 14.53B | 14.18B | 14.04B |
| Cash, Cash Equivalents and Short-Term Investments | 1.94B | 1.67B | 1.40B | 340.40M | 744.10M | 528.10M |
| Total Debt | 11.38B | 10.79B | 10.00B | 8.44B | 8.45B | 8.36B |
| Total Liabilities | 15.54B | 14.77B | 13.60B | 12.02B | 11.15B | 11.08B |
| Stockholders Equity | 1.99B | 2.00B | 2.06B | 2.51B | 3.03B | 2.96B |
Cash Flow | ||||||
| Free Cash Flow | -58.70M | -79.90M | -19.00M | 93.50M | 221.80M | 135.20M |
| Operating Cash Flow | 1.13B | 918.10M | 745.10M | 787.50M | 865.80M | 815.20M |
| Investing Cash Flow | -876.10M | -987.20M | -731.40M | -593.40M | -555.70M | -598.80M |
| Financing Cash Flow | 151.00M | 358.80M | 1.04B | -85.00M | -89.70M | -27.80M |
United Utilities Technical Analysis
Positive
1345.00
Price Trends
1260.48
Positive
1221.34
Positive
1167.30
Positive
Market Momentum
37.82
Negative
73.32
Negative
83.19
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:UU, the sentiment is Positive. The current price of 1345 is above the 20-day moving average (MA) of 1333.20, above the 50-day MA of 1260.48, and above the 200-day MA of 1167.30, indicating a bullish trend. The MACD of 37.82 indicates Negative momentum. The RSI at 73.32 is Negative, neither overbought nor oversold. The STOCH value of 83.19 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:UU.
United Utilities Peers Comparison
UnderperformOutperform
Sector (66)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | £69.60B | 23.75 | 7.87% | 4.15% | -9.52% | 35.74% | |
74 Outperform | £32.46B | 30.88 | 9.92% | 2.98% | 1.78% | -50.72% | |
72 Outperform | £9.49B | 23.65 | 20.43% | 4.45% | 15.76% | 254.82% | |
71 Outperform | £9.85B | 31.21 | 17.41% | 4.50% | 10.68% | 35.18% | |
67 Neutral | £2.81B | 95.69 | 2.50% | 6.56% | 19.50% | ― | |
66 Neutral | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% | |
59 Neutral | £8.88B | -174.07 | -5.95% | 2.86% | -4.82% | -123.58% |
* Utilities Sector Average
GB:UU
United Utilities
1,345.00
411.70
44.11%
GB:CNA
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GB:PNN
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GB:SVT
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3,169.00
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GB:SSE
SSE
2,617.00
1,159.50
79.55%
GB:NG
National Grid
1,345.50
414.86
44.58%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.