Severn Trent share price wobbles after Q3 trading update

Severn Trent’s (LON:SVT) share price has swung between gains and losses this morning after the water and sewerage services company said in a third-quarter update that it was on track to hit its forecasts for the financial year, but inflation and taxes would lead to higher operating costs.

Severn Trent revealed that it was on track to meet its expectations for pretax profit in the year to March 31. Market consensus forecasts have it that underlying earnings will come in at £284.2 million, up from £282.7 million a year earlier.
In line with its previous guidance for its regulated business, Severn Trent said that consumption across its measured income base was expected to be slightly higher year-on-year owing to warmer weather conditions in the UK. Meanwhile, in the non-regulated business, top line growth was expected to moderate in the second half, but full-year profits would still meet forecasts, the company noted.

Operating expenditure continued to be in line with board’s expectations for the year and, on a like-for-like basis, in line with the level of the final determination for its new five-year business plan. Severn Trent also warned that operating costs were expected to rise year on year due to the impact of inflation and quasi taxes, although it said these would be partially offset by efficiency improvements. The group’s expectations for net capital expenditure remained at between £530 million and £545 million.

Severn Trent’s share price started today’s session significantly higher, but fell soon after the opening bell. As of 09:21 GMT, the shares were trading 1.21 percent down at 2,034.00p. According to the Financial Times, the 14 analysts projecting 12 month price targets for the FTSE 100-listed company have a median target of 2,045.00p, with a high estimate of 2,300.00p and a low of 1,845.00p. As of 6 February 2015, the consensus forecast amongst 19 polled investment analysts covering Severn Trent has it that investors should hold their position in the company.
As of 09:48 GMT, Friday, 13 February, Severn Trent Plc share price is 2,032.50p.