Jefferies has moved Centrica (LON:CNA) from a "buy" to a "hold" recommendation, while lifting its price target by 5% to 210p from 200p, the brokerage said on Monday. The change follows the utility's FY25 results, which came broadly in line with market consensus, and prompted Jefferies to cut its near-term earnings outlook.
After reviewing the FY25 outcome, Jefferies trimmed its FY26 group EBITDA estimate slightly to .44 billion from .46 billion, and cut FY27 EBITDA to .47 billion from .50 billion.
On the earnings per share front, the brokerage now expects 11.9p for FY26 (previously 14.4p) and 12.9p for FY27 (previously 15p). Jefferies noted these EPS forecasts sit materially below market consensus - roughly 12% lower for FY26 and 15% lower for FY27 versus FactSet consensus, according to the note.
The steep reduction in FY26 EPS was driven in large part by an alignment to company guidance for higher net interest costs. Jefferies said the revision reflects an additional 00 million of higher net interest cost exposure.
Jefferies also pointed out that consensus EPS estimates had already weakened by roughly 15% over the six months prior to the FY25 update, suggesting investors had been repricing expectations ahead of the results.
Broker rationale and valuation
In its research note, Jefferies highlighted a lack of near-term catalysts for the stock coupled with recent negative earnings revisions as key overhangs. "We see a lack of near-term catalysts along with near-term negative earnings revisions as overhangs for the stock," the brokerage wrote, adding that it sees "better set-ups" elsewhere in the European utilities sector driven by grid businesses and exposure to power demand.
The broker's upgraded price target of 210p per share implies a 2030 price-to-earnings multiple of 10.5 times based on its estimates, while Jefferies' own 2030 EPS projection is 20p. Centrica's shares have risen by more than 10% year-to-date and, on Jefferies' numbers, currently trade at around 10 times the firm's 2030 EPS estimate. Jefferies also cites an implied dividend yield of 4.8% under its valuation.
Jefferies' sum-of-the-parts exercise assigns a total enterprise value of .36 billion, or 203p per share. The breakdown allocates Infrastructure 40% at .70 billion; British Gas 26% at .42 billion; Centrica Energy 18% at .67 billion; and Ireland 7% at 98 million.
After deducting FY26 net financial debt of .02 billion, decommissioning liabilities of negative 93 million and a pension deficit of 50 million, Jefferies calculates a total equity value of .54 billion, equivalent to 210p per share.
2028 and 2030 targets, capital plans and scenarios
Centrica has set a 2030 target of approximately billion in EBITDA and about 22p in EPS. Jefferies' 2030 EPS assumption of 20p sits slightly below that guidance, the broker said, reflecting a degree of conservatism around value creation from unallocated capital expenditure.
Management has outlined a billion investment plan covering 2024 through 2028, with a lower run-rate of post-2028 capital expenditure projected at 00 million to 00 million annually.
Jefferies estimates that more than billion of the total 2026-30 capital expenditure remains uncommitted, underscoring the brokerage's caution on visibility beyond the current investment window.
"The visibility on growth drivers beyond 2028 is limited," Jefferies wrote, and highlighted that management on the FY25 earnings call downplayed the chance of additional buybacks in the near term despite what Jefferies described as sufficient balance sheet headroom.
To frame potential outcomes, Jefferies presented a bull case and a downside scenario. The upside scenario points to a price target of 240p - a 22% upside - on assumptions of FY30 EBITDA of .1 billion, EPS of 23p and a 12 times price-to-earnings multiple. The downside case implies a price of 145p - a 26% downside - assuming FY30 EBITDA of .7 billion and EPS of 16p at a 9 times multiple. Jefferies calculates an upside-to-downside ratio of 1-to-1.16.
Jefferies noted that the bull case would be supported by "creating further visibility over balance sheet utilisation and a more liberal use of buybacks to bolster EPS accretion, especially with the ample balance sheet headroom available."
Divisional modeling and guidance alignment
On a divisional basis, Jefferies' FY26 modeling aligns with Centrica's own guidance ranges. The brokerage forecasts Retail EBITDA of 39 million, which sits comfortably within the company's 00 million to 00 million guidance.
Optimisation is modeled at 50 million, in line with company guidance of approximately 50 million. Infrastructure is modeled at 27 million, within the company's 00 million to 50 million range.
Data-driven idea tool mention
The note also referenced an AI-driven stock idea service that evaluates Centrica among thousands of companies using more than 100 financial metrics, citing past winners such as Super Micro Computer (+185%) and AppLovin (+157%). The service is presented as a tool to compare CNA to other opportunities in the same space.