Broker snap: Nomura bearish on European utilities

9th Jul 2012 11:06

Nomura has retained its 'bearish' view on the European utilities sector, saying that there are downside risks to guidance across the industry.According to the broker's recent investor survey, some 70% of respondents see downside rise to 2013 earnings per share estimates. "With our bearish outlook for power prices, economic headwinds, the risk of political intervention, potential regulatory changes, and ongoing disposals we agree with this sentiment," Nomura said.The broker also has a bearish outlook for power prices in the Central Western European (CWE) region, where the fixed-cost generators are exposed.While less exposed than fixed-cost generators, the 'intergrateds' such as E.On and EDF will not be untouched, the broker said. Nevertheless, E.On and EDF are still expected to hit their 2013 and medium-term guidance, respectively.However, Nomura sees risk of further downgrades in the outlook at GDF Suez given the tough CWE power market, and also believes that RWE could fall short of its 2013 guidance. "We also see challenges at Centrica and SSE.""From the integrated names, our top pick is E.ON given our view it will meet guidance, with this in turn supporting the dividend and consequent attractive yield. As a group, we like the regulated subspace with top picks National Grid, Snam and United Utilities."BC