LONDON (ShareCast) - (Sharecast News) - Deutsche Bank downgraded its stance on shares of United Utilities to 'hold' from 'buy' as they have risen above its 850p price target.
DB noted that the stock has risen strongly since its upgrade to 'buy' on 1 October 2018, with rising confidence around future incentive scheme performance improvements and moderating concerns around political risk.

"However, the stock now looks less clearly undervalued, having risen above our 850p price target," it said.

"Furthermore we believe that UK political uncertainty is rising again as the Brexit negotiations come to a head with growing downside risks."

Deutsche said the UK water companies continue to offer attractive regulatory earnings yields of around 8-8.5% if we look ahead to after the next regulatory review. However, its assessment of political risk-reward now looks slightly skewed to the downside.

For United Utilities, it sees around 10% further upside if political risks fade away entirely with circa 15% downside if the stock trades back down to RAB.

"The key risks relate to political developments and the company's ability to perform under incentive schemes after its review."

DB said it now has no UK regulated utilities rated at 'buy'.

At 1530 GMT, the shares were down 3.3% to 834.80p.

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