United Utilities Earnings: Slightly Above Expectations; Fiscal 2025 Guidance Short of Expectations

We confirm our GBX 1,000 fair value estimate for no-moat United Utilities as we incorporate its fiscal 2024 results that were slightly ahead of FactSet consensus and our estimates. The group guided for fiscal 2025 below expectations on a recurring basis. The fiscal 2024 dividend is set at GBX 49.8, 9.4% higher than in fiscal 2023 and in line with the November 2022 consumer price index including owner-occupiers' housing costs and involving a 4.5% yield. The group guides for a fiscal 2025 dividend of GBX 51.87, implying 4.2% growth. We expect the policy to grow the dividend in line with inflation to be extended to the next five-year regulatory period AMP8, starting in April 2025. The UK water watchdog Ofwat will release its draft decision regarding AMP8's features on June 12 and its final determinations in December. In early 2025, United Utilities will unveil its dividend policy for AMP8. All in all, shares appear overvalued.