Citi reiterates 'buy' rating on Centrica

(Sharecast News) - Citi reiterated its 'buy' rating on British Gas owner Centrica on Friday as it argued that the stock's tepid share price performance in recent days despite the tailwind from a solid trading statement is a reflection of positioning rather than concerns on fundamentals. "We expect Centrica to outline its sustainable level of EBIT at 1H23, which we expect to be range £1.0-1.1bn, implying an earnings per share of circa 12- 13p," the bank said.

"This compares favourably to FY26 consensus EPS currently at 10p. We expect this medium-term guidance to provide earnings and cashflow visibility and, together with clarity on capital allocation strategy (including a further £0.75bn cash return) and investment return hurdle rates, we expect both to underpin current valuation and drive a continued re-rating of the shares."

Citi also said it sees FY23 EPS guidance as very conservative, with little sign of price competition despite marginal uptick in churn and market stabilisation mechanism/ban on acquisition tariffs still in play.