Pennon Group PLC (LON:PNN) has been reinstated with an ‘equal weight’ rating and a 1,060p target price by analysts at Barclays, however, the bank said they still preferred United Utilities Group PLC (LON:UU.), for which they hiked their target to 1,125p from 1020p and retained an ‘overweight’ rating.
In a note on Friday updating its views on the water sector, Barclays also increased their price target on Severn Trent PLC (LON:SVT) to 2,500p from 2,410p and reiterated its ‘equal weight’ rating on the stock.
READ: Pennon confirms £10mln full-year revenue coronavirus hit as initially expected
The bank added that they viewed capital allocation at “key” to the fortunes of the water groups.
Barclays’ reassessment follows a trading statement from Pennon this morning in which it confirmed its full-year revenue hit from the coronavirus (COVID-19) pandemic lockdown is £10mln, as the water supply firm initially expected.
The shortfall reflected an increase in household revenue being offset by lower non-household revenue, due to closures at its commercial customers' operations.
READ: United Utilities sees revenue and profit leak lower due to pandemic
United Utilities painted a similar picture in its own trading update on Thursday, when it said its revenue and profit are expected to be lower than the first half of last year due to lower water consumption from businesses as a result of the pandemic.
The north-west England water company also said it expects bad debt may increase as government support schemes come to an end, but added that it secured early agreement during the pandemic to extend its ‘social tariff’ and has an “extensive range of financial assistance schemes”.
In mid-morning trading on Friday, Pennon shares were up 0.9% at 1,049p, while United Utilities climbed 2.5% to 874p and Severn Trent rose 1.7% at 2,487p.