Centrica Earnings: Fair Value Cut After Another Warning on the Trading Business

Key Morningstar Metrics for Centrica

• Fair Value Estimate
  : GBX 200
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Centrica’s Earnings

Centrica CNA‘s half-year EPS fell 3% year on year to GBX 6.80. The group said that 2026 earnings will be first-half-weighted and that Centrica Energy’s profitability will remain soft in 2027. This caused market jitters, sending shares down by 10% at the time of writing.

Why it matters: In its 2025 results, Centrica already warned on the profitability of Centrica Energy in 2026, following a poor 2025. This new warning casts doubt on the visibility of the business. For 2027, the group was previously positioned for lower gas prices, expecting a supply glut.

• This scenario does not hold anymore because of the Iran war. Consequently, the business’ EBITDA will remain around the 2025-26 levels of £200 million-£250 million, well below the £300 million-£400 million normalized profitability the group expects to reach by year-end 2028.
• For 2026, the group cut the retail business’ EBITDA guidance by 23% because of an expected under-recovery of commodity costs in the second half. On the other hand, the firm raised its EBITDA guidance for infrastructure by 22% to £650 million-£750 million, driven by high commodity prices.

The bottom line: We cut our 2026 EPS estimate to GBX 12 from GBX 15 due to higher financial costs and lower EBITDA estimates for the retail business, which more than offset higher EBITDA for infrastructure, which is more taxed.

• In light of the uncertainty for Centrica Energy, we lower our medium-term EBITDA estimate to the bottom of the £300 million-£400 million range. This leads to a 14% reduction in our long-term earnings estimates and a cut in our fair value estimate to GBX 200 from GBX 220.
• Shares are undervalued as the market overly discounts Centrica Energy’s issues and rising bad debt in retail while overlooking the growing share of businesses with more visibility like Rough, Sizewell B and C.