On Tuesday, UBS has downgraded Centuri Holdings Inc (NYSE:CTRI) stock from Buy to Neutral, significantly reducing the price target to $17.00 from the previous $30.00.
The adjustment follows a series of missed earnings expectations by the company, with three consecutive quarters falling short, stretching from the fourth quarter of 2023 to the second quarter of 2024, spanning both pre- and post-IPO periods.
UBS's revision of Centuri's outlook is driven by multiple factors impacting the company's near-term earnings growth. Challenges cited include slower spending by utility customers, project work that is either delayed or cancelled, and an ongoing leadership transition within the company. These issues have prompted a more cautious stance from the firm.
In addition to the downgrade, UBS has also revised its earnings forecast for Centuri. The firm's estimated EBITDA for the second half of 2025 to the first half of 2026 has been reduced by 10% to $293 million, a decrease from the previous $326 million estimate and below the consensus of $335 million.
The valuation multiple applied by UBS has been lowered as well, reflecting concerns over the slower earnings growth and reduced confidence in the company's execution capabilities.
Despite the immediate concerns, UBS maintains a positive view on the long-term market outlook for Centuri Holdings. However, the firm suggests that the company needs to focus on building investor confidence in its earnings and execution trajectory over the next two to three years. The analyst's comment highlights the balance of risks, stating, "We think risk to the upside is balanced by the risk to the downside."
The downgraded rating and lowered price target reflect UBS's cautious position on Centuri Holdings as the company navigates through its current challenges. The firm emphasizes the need for Centuri to address these issues to reassure investors of its potential for future growth and stability.
In other recent news, Centuri Holdings Inc. has been the subject of several analyst reports. BofA Securities recently downgraded Centuri Holdings' stock rating from Neutral to Underperform, following the announcement of CEO Bill Fehrman's departure.
The firm has also lowered its price target for the company to $21.00. This development comes amidst concerns about the company's future performance due to leadership changes.
On a similar note, BofA Securities had previously initiated coverage on Centuri Holdings with a Neutral rating, acknowledging the company's potential for medium-term margin improvements.
Wells Fargo also initiated coverage on the company, assigning an Overweight rating and setting a price target of $29.00, recognizing the company's significant growth and expansion strategy.
KeyBanc initiated coverage on Centuri Holdings with a Sector Weight rating, emphasizing the company's involvement in the growing sectors of Electric and Gas Transmission & Distribution, clean energy infrastructure, and 5G.
Baird also initiated coverage on the company, assigning an Outperform rating with a price target set at $30.00, highlighting the company's predictable revenue model and significant involvement in U.S. electrification and grid investment. These are the recent developments concerning Centuri Holdings Inc.
InvestingPro Insights
Following UBS's downgrade of Centuri Holdings Inc (NYSE:CTRI), it's important to consider additional factors that might influence investor sentiment. According to InvestingPro data, Centuri has a market capitalization of $1.39 billion, and its stock is trading near its 52-week low, with the price having fallen significantly over the last three months. This aligns with UBS's cautious stance on the stock.
InvestingPro Tips highlight that Centuri operates with a significant debt burden and has been unprofitable over the last twelve months. However, analysts predict the company will be profitable this year, which could provide a positive counterpoint to the current negative sentiment. Additionally, the stock's RSI suggests it is in oversold territory, indicating that it may be undervalued at its current trading price.
For readers looking to delve deeper into Centuri's financial health and future prospects, InvestingPro offers several additional tips. There are 12 more InvestingPro Tips available for Centuri Holdings, which can be accessed by visiting https://www.investing.com/pro/CTRI. To gain full access to these insights, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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