AGL and Origin energy face changing profit forecasts

Power plays

In this week’s edition of IG Macro Intelligence, we examine the financial year (FY) 2025 earnings from AGL Energy and Origin Energy.

Dimmed outlook

AGL Energy (ASX:AGL)

Australia's largest power producer, AGL Energy, reported a 21% drop in underlying profit to $640 million, missing market expectations.

The Sydney-based company is Australia's biggest carbon emitter, and its shift to renewable energy saw retail margins tighten and costs rise during FY 2025. The profit for FY 2026 is forecast between $500 million and $700 million.

AGL Energy earnings results

Chief financial officer (CFO) Gary Brown told ausbiz that AGL is investing in grid-scale battery projects, aiming to offset rising gas costs and support future earnings. 

AGL shares sank following its FY result, as its FY 2026 guidance missed expectations.

AGL Energy daily candlestick chart

Analysts at Jefferies noted AGL's forecast was about 11% below expectations of $670 million, attributing the miss to higher-than-expected depreciation and amortisation, along with finance costs.

Over the past 12 months, AGL shares have shed more than 25%, and ASX Tradewatch data show they are in a long-term bearish trend, signalling that investors see little opportunity in owning the stock at this time.

AGL Energy historical trends and price targets

The 200-day moving average of the stock is falling, while in the nearer term, the 5-day moving average is beneath both the 20-day and 50-day moving averages.

Morgan Stanley cut its price target on AGL by 19% to $9.68 a share following the result. However, the average broker recommendation remains a ‘buy’, according to Refinitiv data, with an average price target of $10.82, suggesting shares can rally around 24% and recoup the past 12 months' worth of losses.

AGL Energy buy/sell indicators and analyst projections

Shedding light

Origin Energy (ASX:ORG)

Origin Energy reported a 26% rise in FY 2025 profit, thanks to strong returns from its liquefied ​natural gas business. 

Australia's largest retail electricity and gas company reported an underlying profit of $1.49 billion, an increase of $370 million on FY 2024. However, earnings from its electricity business fell by $224 million due to higher coal prices and lower retail tariffs.

Origin Energy earnings results

Chief executive officer (CEO) Frank Calabria has hinted at the possibility of extending the lifespan of New South Wales (NSW) massive Eraring Power Station. 

Origin shares have gained close to 30% over the past 12 months and hit a near 11-year high following its results. 

Origin Energy daily candlestick chart

Analysts have raised their price targets on Origin, although the share price has surpassed most targets, suggesting it could be due for a pullback.

ASX Tradewatch data show shares in a strong bullish trend, while the average broker recommendation is a ‘hold’ at $12.34, according to Refinitiv, suggesting shares are more than 3% overvalued at current levels. 

Origin Energy  historical trends and price targets

Jefferies has a $13.15 price target, while Morningstar lifted its fair value on the stock by 15% to $10. Morgan Stanley is underweight on Origin with a $9.80 price target, a 23% drop from current levels.

Origin Energy buy/sell indicators and analyst projections

Watts next?

UBS indicates that Origin’s need for the Eraring Power Station to operate at higher output for longer, along with Origin’s share of Octopus earnings, materially lifts the outlook and valuation of the stock. CEO Frank Calabria acknowledged the challenges ahead.

Regarding AGL, Fergus Humble from Morgans told ausbiz that the investment in green energy hasn't yet paid off. Still,  AGL is pressing forward with its commitment to cleaner energy