RBC has lowered its near-term earnings forecasts for Centrica PLC (LSE:CNA) following last week’s annual general meeting, but maintains a constructive view on the stock.
The Canadian bank cut its price target from 180p to 175p, retaining an 'outperform' rating, and pointed to the Sizewell C nuclear project as a potential catalyst that could support a rerating.
It also reduced its 2025 earnings (EBIT) forecast by 17%, citing falling commodity prices and softer expected contributions from British Gas and Centrica Energy.
However, RBC argues that much of this downgrade is already reflected in the share price and that Centrica’s robust balance sheet and £2 billion capital investment plan still offer upside.
A key focus is the upcoming decision on Sizewell C, the planned UK government-backed nuclear plant.
RBC believes Centrica could play a role in the project under regulated terms, creating a stable and predictable earnings stream with low execution risk.
Early capital outlay would be modest, estimated at £100 million to £200 million annually, but the long-term cash flow could prove valuable.
RBC also highlighted Centrica’s ongoing smart meter rollout. It pointed to Iberdrola’s recent sale of its smart metering business to Macquarie at a multiple of around 11 times EBITDA as a positive read-across for Centrica, which is committing up to £900 million in this area by 2028.
With £650 million remaining in its current buyback programme and a net cash position, Centrica retains capacity for further shareholder returns.
RBC concludes that despite recent headwinds, the company’s strategic shift toward long-term, regulated assets and the energy transition leaves the investment case broadly intact.
The shares, which have fallen 8% in the last five trading days, were flat in afternoon trading at 147.1p.