Broker snap: MS sees earnings risk for utilities

26th Nov 2009 10:45

On the day when Ofwat, the water regulator, released its final ruling on pricing restrictions for the water companies, Morgan Stanley has issued a timely review of the utilities sector.Two of Thursday morning's best performing stocks, Severn Trent and United Utilities, are named as Morgan Stanley's least preferred stocks in the sector, while its top pick among UK stocks in the sector is National Grid..The US bank is concerned over enduring weakness in power and gas prices. 'If the steep power price flattens in the medium term, which we think it will, we see further downside to 2011 earnings. We think it plausible rating agencies could adopt a tougher approach, especially if power prices fall,' Morgan Stanley said.