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Investing.com -- RBC Capital Markets upgraded Terna and Italgas to “outperform” while downgrading Snam to “sector perform,” pointing to diverging earnings growth prospects across the Italian utilities sector, in a note dated Tuesday.
The brokerage raised Terna’s price target to €9.6 from €8.6 and Italgas’ to €9 from €6.8, while cutting Snam’s to €5.15 from €5.30.
The shift reflects expectations of stronger medium-term earnings for Terna and Italgas, alongside a slower growth trajectory for Snam.
RBC analysts wrote, “we expect Terna will deliver consistent mid-single-digit EPS growth through 2030 on our estimates, supported by robust RAB growth at 7%.”
By contrast, “its (Snam) anticipated growth lags behind that of Italian network peers, with an annual rate of below 2% through 2030 (RBCe at 1.5%).”
For Terna, the upgrade follows a period of underperformance tied to muted 2025 EPS growth of less than 2%.
The brokerage said, “we believe Terna’s recent underperformance explained by lower EPS growth in 2025 is over,” citing improved financing conditions such as a €750 million bond issuance at a 3% coupon, below the company’s forecast.
The analysts added that a favorable incentives framework under development, including the ROSS Integrale mechanism, “appears promising and could accelerate EPS growth.”
Italgas’ rating boost rests on the transformative impact of its €1 billion-plus acquisition of 2i Rete. The deal, according to RBC, drives a near 10% annual EPS growth outlook through 2030.
“Despite the strong growth outlook, Italgas remains attractively valued in terms of its PE ratio,” the brokerage said, with a 2030E multiple of about 7.5x, the lowest among Italian regulated peers.
Analysts also expect further details at Italgas’ October Capital Markets Day, when management is likely to update on cost savings and asset sales.
Snam, in contrast, is projected to deliver strong 2025 EPS growth of about 14% but lag peers in the years ahead. RBC cited modest 4% annual RAB growth through 2030 and challenges tied to investments in biomethane and the planned acquisition of OGE.
“Investments in biomethane have shown poor returns and below the company’s initial expectations and OGE’s returns remain unclear,” the brokerage said.
While Snam’s dividend yield is set to remain above 6%, analysts concluded that slower growth justifies the downgrade.
The brokerage also noted regulatory risks, including the potential activation of a trigger mechanism that could cut allowed returns by 20-30 basis points in 2026.
This would reduce EPS by about 4% for Terna and Italgas, and 3% for Snam. Still, RBC flagged that Italian regulators have historically taken an accommodating stance.
Snam faces a slower earnings expansion in the near-term despite a strong earnings profile in the near-term, despite the bank’s positive outlook for Italgas and Terna.