Deutsche Bank gave a knock to Centrica PLC (LON:CNA) shares on Monday as it cut its target price for the owner of British Gas in a review of the outlook for European utilities in 2019.
The German bank repeated a ‘sell’ rating on the FTSE 100-listed firm and reduced its target to 115p from 135p, leading the shares to shed nearly 4% at 134.10p in late morning trading.
READ: British Gas owner Centrica expects energy price cap to hit 2019 earnings
In another negative UK sector move, Deutsche Bank downgraded its rating for blue-chip power firm SSE PLC (LON:SSE) to ‘hold’ from ‘buy’ and reduced its target price to 1,180p from 1.250p, with its shares losing 2.8% at 1,058.50p.
However, the bank was more positive on FTSE 250-listed multi-utility Pennon Group PLC (LON:PNN), raising its target price to 790p from 780p, with the shares currently trading at 708.80p, up 0.7% on Friday’s close.
Overall, Deutsche Bank’s analysts said although some may think it could be time to dump European utilities ahead of a bond yield rally, they think investors shouldn’t act so fast.
They pointed out: “Utilities' earnings are starting to grow again, power prices have risen strongly, balance sheets are in a better position and there has been a pickup in M&A.“
The analysts concluded: “The sector yields over 5% while renewable power and infrastructure investments give long-term opportunities for growth.”