JPMorgan has lowered its stance on Centrica (LON:CNA), arguing that the British Gas owner’s earnings are likely to miss market forecasts and that a dividend cut is imminent, Proactive Investors reports. The comments come after Jefferies trimmed its price target on the company last month, saying at the time that the group’s payout to shareholders was ‘hanging by a thread’.
The move weighed on the Centrica share price yesterday, sending the stock 0.18 percent lower to 109.05p. This morning, the shares have extended the previous session’s loss and were trading 0.12 percent lower at 108.92p as of 08:02 BST.
JPMorgan lowers rating
JPMorgan Chase & Co lowered its rating on Centrica from ‘overweight’ to ‘neutral’ yesterday, and trimmed its valuation on the shares from 150p to 125p. Proactive Investors quoted the analysts as commenting that for some time they had “argued that the introduction of price regulation in the UK would adversely impact competition leading to compressed market pricing and therefore lower churn”.
“All else equal while earnings would be hit by the cap, lower earnings volatility and stable customer numbers were expected to provide cost of capital relief and multiple expansion in the operating periods ahead,” the broker continued, further pointing to a temporary surge in commodity prices.
“Add mild first quarter weather, nuclear outages and softening upstream revenue to the mix and we now see 2019 and 2020 earnings per share below consensus,” JPMorgan noted, concluding that combined with ‘an impending dividend cut,’ this was too much for the broker to endure, despite the weakness in the Centrica share price.
Other analysts on company
Goldman Sachs, which is ‘neutral’ on the British Gas owner, lowered its valuation on the shares from 126p to 122p yesterday. According to MarketBeat, the company currently has a consensus ‘hold’ rating, and an average price target of 124.55p.