United Utilities shares (LON: UU.) were downgraded by RBC Capital recently, with analysts citing limited upside following a strong run in the stock price.
The firm cut its rating on the water utility from Outperform to Sector Perform while maintaining a price target of 1,175p on the stock.
The shares have risen more than 8% year-to-date and over 13.8% in the last 12 months, prompting RBC to re-evaluate the stock’s valuation.
“We see more limited upside in our UU valuation given where the stock now trades,” RBC Capital said in its note to clients.
United Utilities’ recent Capital Markets Day (CMD) reportedly gave investors more insight into the company’s long-term plans and delivery strategy.
RBC acknowledged the company’s strong focus on delivery but highlighted a lack of clarity regarding future gains.
“We await further details on the breakdown of expected outperformance beyond the guided at least 100bps,” the analysts added.
The downgrade suggests that while RBC continues to view United Utilities as operationally solid, it believes much of the near-term good news is already reflected in the share price.
The stock trades at 1,145p this morning, around 4% below the firm’s target.
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