Wells downgrades American Water to Underweight on low return potential

Wells Fargo analyst Jonathan Reeder downgraded American Water to Underweight from Equal Weight with a price target of $138, up from $127. The analyst shuffled water utility ratings ahead of most Q2 updates based on recent performance, some regulatory developments and the macro environment. The downgrade of American Water reflects a belief that the shares offer the lowest total return potential out of Wells’ five covered water utilities, the analyst tells investors in a research note. The firm believes the stock deserves more of an in-line multiple instead of a premium given a “downward risk bias” to earnings estimates and a lack of identifiable nearer-term company-specific catalysts.