RBC Capital Markets downgrades Centrica to 'sector perform'

Centrica’s shares fell on Monday as RBC Capital Markets downgraded the stock to ‘sector perform’ from ‘outperform’ and cut the target price to 240p from 250p.

“With a growth strategy lacking in proof points, a domestic energy pricing position that remains uncompetitive and commodity prices about 5-10% off summer highs, we are becoming less optimistic on Centrica,” RBC said.

RBC said it is concerned that the long-term growth plan for Centrica’s new segments still appears to be in its infancy as the group tries to figure out the best offerings to customers combining the Connected Home, Home Services and Energy services.

The broker believes Centrica should have taken the initiative to launch new product offerings across its services since Ofgem is no longer enforcing the four tariff rule.

“Centrica is facing a sixth year in a row of customer losses in 2016, and while a more stable/gently rising commodity environment may help reduce the cost advantage of the less hedged independent suppliers the competitive environment remains difficult,” RBC said.

“In every month this year other than June, the cheapest British Gas tariff has been at least 30% more expensive than the lowest on the market. With Centrica suffering domestic account losses of 3% in the first half of 2016, the outlook for the remainder of the year remains tough.”

Shares dipped 0.66% to 225.70p at 1018 BST.