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Highlights

  • JPMorgan Cazenove cuts Centrica’s rating to ‘neutral’ from ‘overweight’.
  • Price target lowered to GBX 167 from GBX 170, citing limited valuation potential.
  • Updated earnings forecasts fall below Bloomberg consensus for 2025/2026 

JPMorgan Cazenove downgraded Centrica Plc (LSE: CNA), the owner of British Gas, to ‘neutral’ from ‘overweight’ on Monday, citing a reduced scope for valuation upside. Alongside the downgrade, the investment bank trimmed its price target for the stock to GBX 167 from GBX 170. The move reflects a view that much of the stock’s prior growth has already been realised, and that further appreciation may be constrained in the near term. 

Centrica shares have outperformed their sector peers by approximately 290% since the third quarter of 2020. During that time, the market gradually began to recognise previously underappreciated elements such as the company’s improved balance sheet and potential earnings derived from internal restructuring. However, JPMorgan believes that much of this recognition has now been priced in. 

“With the normalisation of commodity prices and a less volatile trading environment, we see more limited upside from here,” the analysts wrote in their note to clients. 

 

The bank also revised its earnings forecasts for the utility company, placing its 2025 and 2026 earnings per share (EPS) estimates 11% and 5% below the Bloomberg median consensus, respectively. This suggests a more cautious outlook compared to market expectations, especially as the energy market returns to more stable conditions following several volatile years. 

Looking ahead, JPMorgan anticipates that Centrica's interim results, scheduled for release on July 24, will reflect ongoing challenges in both its Energy Markets & Trading and UK Energy Retail segments. While these conditions may be seen as temporary, they nonetheless weigh on the bank’s current view of the stock’s risk/reward balance. 

The reassessment comes amid a broader recalibration of expectations in the utilities sector, particularly as the post-pandemic and post-energy crisis tailwinds fade. Centrica's share price performance has benefitted from these dynamics, but investors may now face a more neutral outlook moving into 2025.