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UPDATE 1-Snow and competition force FirstGroup to downgrade earnings forecast

* Sees hit to earnings from snow, budget airlines

* Company remains committed to ultimately restoring dividend

* Shares fall more than 11 percent (Adds CFO comment, share price, analyst comment)

LONDON, Feb 21 (Reuters) - British transport company FirstGroup downgraded its forecast for annual earnings after severe weather and increased competition hit its North American businesses.

Shares in First Group, which runs yellow school buses and Greyhound coaches in the United States, shed 11 percent of their value, one of the biggest losers on Britain's mid-cap index.

The company, which also operates train services between London and Bristol in western England, guided that adjusted earnings per share (EPS) would be "slightly reduced." There was no change to management's forecast for "substantial cash generation" for the year, it added.

Liberum analysts called the update disappointing, noting that difficulties in the last few months would wipe out the benefits FirstGroup would have received from lower corporate tax rates in the U.S., where it derives over half its revenues.

"Given that this (the tax changes) should have led to an approximate 9 percent uplift to earnings per share, the apparent reduction in the full-year outlook despite this is especially disappointing," said Liberum analyst Gerald Khoo, who has a "buy" rating on the stock.

Severe snowstorms in January in North America meant canceled school days, affecting its student bus services, while competition from budget airlines on longer distance routes provided by its Greyhound coaches dented demand over the holiday season, FirstGroup said.

Reuters data showed analysts had expected FirstGroup to post EPS of 12.7 pence for the 12 months ended March 31 2018 before the announcement on Wednesday.

FirstGroup's reassurance on cash generation, however, could signal that it could still restart its dividend despite the profit warning.

FirstGroup has not paid a dividend since a rights issue in 2013 when it raised 615 million pounds to help pay down debt.

The chief financial officer of Scottish-headquartered FirstGroup said there was no change to the company's plan for the dividend when asked on an analyst call on Wednesday.

"We still think this should be a dividend paying stock and we've always said that we will pay a dividend at the point that we're comfortable that we have sustainable cash flow from the business," CFO Matthew Gregory said.

Shares in FirstGroup have lost 28 percent of their value over the last year, underperforming Britain's midcap index which is trading 5 percent higher. (Reporting by Sarah Young; Editing by James Davey and Keith Weir)