Centrica 2018 results: shares down after earnings revenue beats estimates

The stock of British Gas's owner drops despite better-than-expected profits.

Centrica PLC shares are down after a better-than -expected earnings report. Centrica’s 2018 earnings were high, but stock fell to a 16-year-low after weak 2019 guidance.

Centrica earnings:key figures

Earnings per share (EPS) 3.3 pence
Revenue

£29.7 billion

Adjusted net profits

£1.4 billion

Centrica earnings

Centrica’s revenue was £29.7 billion, an increase of 6%. The owner of British Gas had a higher adjusted operating profit of £1.4 billion, a surge of 12%. While Centrica’s revenue and profits were up, earnings per share (EPS) were down 44% to 33 pence.

Brewin Dolphin senior investment manager, John Moore, noted that while Centrica had challenges, it could continue to have increased profits in future earnings reports.

‘Closer to home, British Gas lost more than 740,000 customers in 2018, adding to large customer defections in the previous year. However, with many of the challenger brands hitting the rocks over the past year, it is beginning to feel like a ‘survivors’ market’ which may benefit Centrica in the long term,’ said Moore.

What do Centrica’s 2018 earnings mean for their share price?

Centrica’s earnings increase ironically meant a decrease for the company’s share price. The Despite higher revenue, Centrica stock fell after fell after a worse-than-expected 2019 outlook. The weak guidance for Q1 could lower its current share price of £119.05.

How do Centrica’s 2018 earnings compare to other energy stocks?

Centrica’s earnings were comparable to another British energy company. EDF Energy had mixed results in their revenue report and their stock dropped just as Centrica’s did after its earnings results.

What is Centrica’s dividend forecast?

Centrica’s dividend forecast is unchanged at 12 pence per share. Centrica offered weak guidance for 2019 earnings because of a price cap increase in the UK that is causing customer loss. John Musk, RBC Europe analyst, noted that the 2019 dividend may be lowered because of lower commodity prices possibly causing a drop in 2019 earnings.

‘Lower commodity prices have put further pressure on earnings such that we do not believe that the current 12 pence a share dividend is sustainable. We now assume an 8 pence dividend from 2019, with a 75 percent payout ratio from 2020 onwards,’ said Musk.

Despite the lowered guidance, chief executive officer, (CEO) Iain Conn, had an optimistic outlook for Centrica’s 2019 earnings.

‘We are taking actions to strengthen the company in 2019 and improve underlying performance in 2020, including driving cost efficiency hard and delivering further divestments, and as a result net debt levels remain underpinned. Our focus is on performance delivery and financial discipline as we satisfy the changing needs of our customers,’ said Conn.

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