Broker view: Severn Trent recommended as a “hold” on trading update

3rd February 2016

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As Severn Trent reports a Q3 trading update, Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors…

This morning, utility company Severn Trent reiterated guidance for the year and said that trading was in line with expectations. This news will not come as any surprise to investors as the group continues to invest in operational improvements and identify further efficiencies.

Investors should acknowledge that the FTSE 100 company’s hard work is being translated into increased net rewards of £15m for the full year from outcome delivery incentives.

The group stated today that its customers are its focus and it is continuing to invest in operational improvements to build a better business for customers, colleagues and shareholders. The sector’s rise of late has been on the back of improved clarity from the regulator, a low interest rate environment and easing of political pressure. With the shares still trading close to an all-time high, at present, we recommend Severn Trent as a ‘hold’ for income seekers. For those interested in the sector, our preference remains United Utilities.

 

 

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