American investment bank Citi has upgraded its price target for Centrica PLC (LSE:CNA) shares and reiterated its 'buy' recommendation for the company.
The new 12-month price target is set at 118p, up from 110p, following last week's positive trading update from Centrica.
The update revealed that the company is generating a free cash flow yield of around 20%, which could lead to further returns for shareholders.
Citi also sees upside risk for higher sustainable earnings and cash flow generation in the medium term, particularly from a liquified natural gas (LNG) contract that has not yet been reflected in the current share price.
Citi notes that Centrica's balance sheet is solid and getting even more robust, making it one of the top picks in the sector. Centrica is the parent company of British Gas, the largest supplier of natural gas in the UK.
The shares, up a third in the last year, opened Wednesday’s session 1% higher at 98.06p.
Of the 15 analysts logged by Proactive as following Centrica, 13 are positive on the stock with either ‘buy’ or ‘outperform’ recommendations.
The consensus share price target is 128p, a 28.5% premium to the current share price.