Centrica share price outperforms as Goldman Sachs says ‘buy’

Centrica share price outperforms as Goldman Sachs says ‘buy’
Written by:
Tsveta van Son
18th September 2018
Updated: 11th March 2020

Shares in Centrica (LON:CNA) have climbed higher in today’s session as Goldman Sachs lifted its rating and price target on the British Gas owner. WebFG quoted the analysts as arguing that the underperformance is overdone.

As of 13:29 BST, Centrica’s share price had added 2.20 percent to 148.65p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.08 percent higher at 7,308.11 points. The group’s shares have given up more than a fifth of their value over the past year, as compared with less than a one-percent gain in the Footsie.

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Goldman Sachs bullish on Centrica

Goldman Sachs hiked its rating on Centrica from ‘sell’ to ‘buy’ today, lifting its price target on the shares from 174p to 176p. WebFG News quoted the analysts as saying that the British Gas owner’s shares have fallen around 40 percent over the last two years, weighed down by rising competition and increased political regulatory scrutiny within UK energy supply.

“What we believe is being overlooked is the impact of higher commodity prices. Year to date, gas and power prices have rallied 40 percent and 35 percent, respectively,” the broker pointed out, adding that they believed that the higher commodity prices added 26-percent earnings per share growth out to FY2020. 

Ofgem caps seen as also reducing risk

Goldman Sachs also pointed to industry regulator Ofgem’s recent price caps, which were in line with consensus. 

“We believe this event reduced sizeable downside risk and is before any potential moderation that could occur in the coming months,” the broker said, as quoted by the newswire.

The news comes after last week, the British Gas owner appointed a BP (LON:BP) veteran to replace the outgoing chief executive of its Business unit.

As of 13:45 BST, Tuesday, 18 September, Centrica PLC share price is 148.70p.

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