Proactive Investors - British Gas owner Centrica (LON:CNA) has been slapped with a downgrade by US bank Jefferies, which questions where the next boost is coming from as gas prices normalise.
So far, Centrica has outperformed the sector by 50% in 2023 but uncertainty over earnings going forward might weigh on the shares, which look fairly priced at current levels.
The year coming to an end saw three main driers, suggests Jefferies: A good business update; £500m of cost recovery and a stand-out balance sheet and £1bn buyback.
All of these might start to reverse from here, especially earnings momentum.
Further buybacks could support current valuation levels, but further visibility is needed on how Centrica can create value using its standout financial strength.
In particular, more clarity is needed on the capex programme for investors to get comfortable with returns.
Hold with an unchanged price target of 160p.