Iberdrola is different, Citi says, adds to Focus list

Shares in Iberdrola do not look cheap in comparison to its sector, but it is “different”, it is a ‘growth’ story in a shrinking sector, Citi said.

“The Spanish utility group’s financial dynamic has little to do with the industry,” analyst Antonella Bianchessi said in a research note sent to clients.

Management has secured pipeline of €12bn-worth of projects – in networks and renewable – that will allow it to grow invested capital, returns, and earnings per share and ultimately it dividend pay-outs while at the same time strengthening its balance sheet, Bianchessi explained.

Her estimates called for the company’s EPS to grow by 5.4% per annum over the 2015-2020 period versus a drop of 1.6% for the sector.

In particular, she called attention to how the residual life of the firm’s assets was the longest among integrated utilities.That long-term trend was not priced-in, she add.

Bianchessi added the shares, which had a ‘buy’ recommendation attached to them, to Citi’s Focus list.