Analysts cuts Southwest Water forecast after loss

An analyst kept a "Hold" rating on Southwest Water Co. Tuesday, the day after the water utility said it swung to a first-quarter loss due in part to a jump in overhead costs.

Brean, Murray, Carret & Co. analyst Michael E. Gaugler said he would keep his current rating based on valuation.

"While we are not advocating increasing exposure, we also see limited downside risk in maintaining existing positions," Gaugler said in a note to clients.

He did lower his 2008 earnings estimate to 30 cents per share from 42 cents per share. Analysts polled by Thomson Financial expect, on average, earnings of 49 cents per share for the year.

Los Angeles-based Southwest Water said the first-quarter loss was due in part to a $1.8 million jump in corporate overhead costs.

"The company appears to be using all the tools at its disposal (acquisitions to augment future growth, pruning of underperforming assets, lowering the cost structure, judiciously leveraging the balance sheet) to return to a high-growth mode," Gaugler said. "It appears investors will still have to wait several more quarters before visibility into what this business model is capable of delivering materializes."

Shares fell 17 cents to $10.95 in Tuesday afternoon trading.