Jefferies downgraded Centrica to 'hold' from 'buy' on Monday, citing limited visibility on growth beyond 2028 and near-term earnings pressure, even as it raised its price target by 5% to 210p from 200p. The brokerage cut its FY26 EBITDA and EPS estimates by 1% and 17% respectively following Centrica’s FY25 results, which came in line with consensus. The sharp EPS reduction was driven by £100 million in higher net interest costs, now aligned to company guidance. Jefferies noted that consensus EPS had already fallen roughly 15% over the prior six months before the FY25 update.

The analyst highlighted a lack of near-term catalysts and negative earnings revisions as overhangs for the stock, contrasting with better opportunities in the European utilities sector. Centrica’s stock has risen more than 10% year-to-date and trades at 10 times Jefferies’ 2030 EPS estimate of 20p per share. The brokerage’s price target implies a 2030 price-to-earnings multiple of 10.5 times and a dividend yield of 4.8%. Jefferies revised its FY26 group EBITDA estimate to £1.44 billion from £1.46 billion and cut FY27 EBITDA to £1.47 billion from £1.50 billion. For EPS, the brokerage now forecasts 11.9p for FY26, down from 14.4p, and 12.9p for FY27, down from 15p. Both figures sit 12% and 15% below Factset consensus for FY26 and FY27 respectively, per the Jefferies note.

On the divisional breakdown, Jefferies modeled FY26 Retail EBITDA at £639 million, within Centrica’s £500 million to £800 million guidance range, Optimisation at £250 million in line with company guidance of approximately £250 million, and Infrastructure at £627 million, within the £500 million to £650 million guidance range. Centrica set a 2030 EBITDA target of approximately £2 billion and EPS of approximately 22p. Jefferies placed its own 2030 EPS estimate at 20p, below that implied guidance, attributing slightly less value creation to unallocated capital expenditure. The company’s £4 billion investment plan runs from 2024 to 2028, with a post-2028 capital expenditure run-rate of £600 million to £800 million. Jefferies estimated that more than £1 billion of the total 2026-30 capital expenditure remains uncommitted.

Jefferies said the bull case rests on '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.' The sum-of-the-parts valuation assigns a total enterprise value of £9.36 billion, or 203p per share, with Infrastructure accounting for 40% at £3.70 billion, British Gas at 26% at £2.42 billion, Centrica Energy at 18% at £1.67 billion, and Ireland at 7% at £698 million. After deducting FY26 net financial debt of £1.02 billion, decommissioning liabilities of negative £693 million and a pension deficit of £150 million, Jefferies arrives at a total equity value of £9.54 billion, or 210p per share. The upside scenario of 240p, representing 22% upside, assumes FY30 EBITDA of £2.1 billion, EPS of 23p and a 12 times price-to-earnings multiple, while the downside scenario of 145p, representing 26% downside, assumes FY30 EBITDA of £1.7 billion and EPS of 16p at a 9 times multiple, giving an upside-to-downside ratio of 1-to-1.16, per the Jefferies note.