On Tuesday, Barclays shifted its stance on Naturgy Energy Group (NTGY:SM) (OTC: GASNY), raising the stock from Underweight to Equalweight and adjusting the price target to €25.10, up from the previous €24.50. The upgrade follows a reassessment of the company's valuation, particularly its flexible generation assets.
Barclays highlighted that Naturgy has demonstrated significant sensitivity to changes in the load factor of combined cycle gas turbines (CCGTs). Despite ongoing corporate governance uncertainties, the firm anticipates a positive turnaround story for Naturgy, driven by its flexible generation capabilities.
Naturgy's stock performance has lagged this year, with a 13% decline, in stark contrast to the SXP6 index's gain of 5.2%. This downturn has been attributed to falling net earnings and lower gas prices. However, Barclays expects Naturgy to provide a positive surprise to the market with better earnings per share (EPS) guidance during its Capital Markets Day in the first half of 2025.
The improved outlook is anticipated to stem from a recovery in power generation activities, particularly due to a bounce back in CCGT load factors. Barclays' commentary suggests that these factors will contribute to Naturgy's potential to exceed market expectations in the near future.
In other recent news, Naturgy Energy Group has received noteworthy attention from two prominent financial firms, Morgan Stanley and Exane BNP Paribas (OTC:BNPQY). Morgan Stanley resumed coverage of Naturgy, assigning an Equalweight rating with a price target of EUR24.00, while highlighting the company's improving fundamentals and potential earnings per share (EPS) upgrades. However, the firm also pointed to Naturgy's lower liquidity compared to its peers as a potential concern.
In a separate development, Exane BNP Paribas upgraded Naturgy's stock from Underperform to Neutral, increasing the price target to €24.80. This change reflects Naturgy's strong fundamental valuation and robust free cash flow generation over the past few years. Naturgy's attractive dividend yield, which exceeds 6%, was also noted as a positive factor.
These are recent developments and investors will be watching closely to see how Naturgy addresses the liquidity concerns raised by Morgan Stanley and whether the anticipated EPS upgrades materialize. They will also be interested in the potential changes in Naturgy's shareholder structure, as suggested by Exane BNP Paribas, which could further influence the company's stock performance.
InvestingPro Insights
Recent data from InvestingPro adds depth to Barclays' analysis of Naturgy Energy Group. Despite the stock's underperformance this year, InvestingPro metrics reveal a company with solid fundamentals. Naturgy's P/E ratio of 11.39 indicates that it's trading at a relatively low earnings multiple, which aligns with Barclays' view of potential undervaluation.
InvestingPro Tips highlight Naturgy's financial stability and shareholder-friendly policies. The company has maintained dividend payments for 46 consecutive years, demonstrating a strong commitment to returning value to shareholders. This consistent dividend history could provide a cushion for investors during periods of stock price volatility, such as the recent 13% decline noted in the article.
Moreover, InvestingPro data shows a dividend yield of 4.18%, which may attract income-focused investors. This substantial yield, combined with the company's dividend growth of 19% over the last twelve months, supports Barclays' optimistic outlook on Naturgy's potential for a positive turnaround.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Naturgy Energy Group, providing a deeper understanding of the company's financial health and market position.
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