Asia stocks rise, Japan close to record highs on trade deal, tech cheer
Investing.com -- J.P. Morgan has downgraded Centrica ’s (LON:CNA) stock rating to “neutral” from “overweight,” citing limited upside following a strong multi-year performance, in a note dated Monday.
The brokerage notes that Centrica has outperformed the sector by around 290% since Q3 2020, but much of the earnings recovery and balance sheet improvement is now reflected in the stock.
The updated price target is 167p, down from 170p, offering just 2% implied upside from the current price of 164p as of June 27, 2025.
J.P. Morgan has revised down its earnings estimates for 2025 and 2026. Adjusted EPS is now forecast at 11.76p and 14.39p, respectively, compared to prior estimates of 12.42p and 14.56p.
These projections are 11% and 5% below Bloomberg consensus. Adjusted EBIT for 2025 is cut to £839 million from £917 million, and EBITDA to £1.33 billion from £1.53 billion.
Similar reductions follow for 2026, with EBITDA now estimated at £1.41 billion, down from £1.53 billion.
The downgrade is driven by softer performance in Energy Markets and UK Energy Retail, both facing pressure from warm weather and ongoing geopolitical volatility.
Centrica Energy’s H1 EBIT is expected at £49 million, down 79% from £232 million in H1 2024.
Infrastructure earnings are also weaker, with H1 profit from Spirit Energy expected at £101 million, down from £245 million last year, due in part to the anticipated sale of the Cygnus gas field stake. Nuclear is forecast to contribute £121 million in H1, down from £224 million..
Full-year adjusted net income for 2025 is projected at £569 million, revised from £597 million.
Net cash is forecast at £1.74 billion for 2025, slightly higher than the previous £1.64 billion forecast, but expected to decline in subsequent years due to reduced cash flow from asset disposals.
Adjusted EPS for 2025 reflects a 5.3% downgrade, driven partly by J.P. Morgan’s new assumption that share buybacks will occur at 165p rather than the previously assumed 150p.
Centrica’s valuation now implies an adjusted P/E of 13.9x for 2025 and 11.4x for 2026, with EBITDA margins forecast at 5.7% and 5.9% for the respective years.
Free cash flow to brokerage is projected to be negative at -£268 million in 2025 and -£110 million in 2026. The dividend yield is expected to rise from 3.4% in 2025 to 3.7% in 2026.