United Utilities kicks off the latest round of water companies updates on Thursday (14 Nov) and UBS says the line to watch for is capital expenditure (capex).
“The industry needs to show it is scaling up capex, and not because of higher unit price/totex [total expenditure] underperformance.
“We say this because we believe that only by reducing storm overflows and spills (both capex-heavy) will the political and public perception improve.”
United Utilities is one of UBS’s favourites, even so, as it trades at a 6% premium to March 2026 regulated assets and has a 5.1% dividend yield, which the bank thinks is sustainable.
For Thursday’s interim results update, UBS is expecting underlying profits [EBIT] of £326 million (£271m) and EPS of 20.3p (13.2p) with capex guidance of £0.85-1.1 billion.
'Buy' with a price target of 1,180p is the investment view.