Centrica slides on SocGen downgrade

Centrica shares slid on Thursday after Societe Generale downgraded the stock to ‘sell’ from ‘hold’.

The downgrade came as the bank updated its commodity price assumptions to reflect the current forward curves, resulting in a 19% cut to its 2016 adjusted basic earnings per share forecast to 14.3p.

“Our target price is reduced to 175p (previously 250p), which despite the 5.8% dividend yield, results in a prospective -10% total shareholder return – prompting us to downgrade the share.”

SocGen also cut its 2015 estimate to 17.1p from 18.1p despite Centrica’s srong nuclear and oil and gas output, due to the negative impact of the mild December weather on gas volumes.

The bank estimates the improvement to the balance sheet capacity from the dividend per share cut and the one notch rating downgrade has been eroded by lower commodity prices.

It now expects a 2016 payout of 84% and a retained cash flow credit metric of 29%, versus Moody’s target in the mid-20s.

The bank pointed out that its our forecasts do not incorporate any material negative impact from the CMA Energy Market Review due in March 2016.

At 1052 GMT, Centrica shares were down 4% to 201.80p.