RWE stock backed by Citi after earnings beat and capital return boost

EditorEmilio Ghigini
Published 14/11/2024, 09:16
RWE stock backed by Citi after earnings beat and capital return boost
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On Thursday, RWE AG (RWE (LON:0HA0):GR) (OTC: OTC:RWEOY) stock received a reaffirmation of a Buy rating and a EUR43.00 price target from a financial analyst at Citi.

The endorsement comes in the wake of RWE's third-quarter results, which showed an EBITDA of EUR1,077 million, a decrease of 29% year-over-year but 11% higher than the market consensus.

The company's adjusted net income (ANI) also surpassed expectations, reaching EUR279 million, a 46% decline from the previous year yet 43% above consensus predictions.

RWE's performance in the first nine months of 2024 was highlighted by an EBITDA of EUR4 billion and an ANI of EUR1.6 billion. These robust figures have prompted RWE to adjust its full-year outlook from the 'low end' to the 'middle of the range' of its forecast.

The updated guidance now anticipates an EBITDA between EUR5.2 billion and EUR5.8 billion, with the market's expectation at EUR5.45 billion, and an ANI ranging from EUR1.9 billion to EUR2.4 billion, against a consensus estimate of EUR2.125 billion.

The company's recent quarterly report also included an unexpected revision to its capital allocation strategy. RWE announced it would initiate a share buyback program worth up to EUR1.5 billion, commencing in the fourth quarter of 2024. This buyback represents nearly 7% of RWE's market capitalization.

According to Citi's analysis, the move to update the capital allocation policy responds to increasing pressure over the past few quarters, and the market is anticipated to react favorably to this development.

In other recent news, RWE AG has reported robust financial performance for the first half of fiscal year 2024, with substantial growth in renewable energy production. The company's strategic investments in wind, solar, and battery storage have resulted in a notable year-on-year growth in the renewable energy segment. RWE's financial results include an adjusted EBITDA of EUR1.014 billion and an adjusted net income of EUR1.36 billion for H1 2024.

Citi reaffirmed its Buy rating on RWE AG stock recently, maintaining a steady price target of EUR43.00. The firm introduced a positive short-term 90-day outlook on the company, citing potential advantages from a shift in market sentiment towards the renewable sector due to possible decreases in interest rates. Citi suggests that RWE may share positive developments regarding its performance and outlook during its third-quarter results announcement.

RWE has also confirmed its earnings per share target for the current year and expects a 27% reduction in CO2 emissions compared to the previous year. The company's 2024 outlook includes an expected adjusted EBITDA between EUR5.2 billion and EUR5.8 billion, and adjusted net income expected from EUR1.9 billion to EUR2.4 billion.

These recent developments underscore RWE's commitment to its green strategy and its ability to navigate market conditions while investing in renewable energy projects.

InvestingPro Insights

RWE AG's recent financial performance and strategic decisions align with several key metrics and insights from InvestingPro. The company's P/E ratio of 7.96, which is notably low, supports the analyst's Buy rating and suggests potential undervaluation. This is further reinforced by an InvestingPro Tip indicating that RWE is "trading at a low earnings multiple."

Despite the year-over-year decline in EBITDA and adjusted net income, RWE remains profitable, with an operating income margin of 24.34% for the last twelve months as of Q3 2024. This profitability is consistent with another InvestingPro Tip stating that analysts predict the company will be profitable this year.

The announced share buyback program, representing about 7% of RWE's market capitalization, aligns with the company's solid financial position. An InvestingPro Tip notes that RWE's "liquid assets exceed short term obligations," which supports its ability to undertake such a significant capital allocation initiative.

For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for RWE AG, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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