Broker snap: Centrica well placed in market

10th Dec 2010 10:54

Although estimates have been scaled back, Nomura retains its positive stance on Centrica as the company is best placed to benefit from the changes of the energy and home services industry.The broker maintains that the utility group will be its top pick in 2011, as it will be able to adapt from UK supply being altered from a commoditised energy supply market to an energy and related home services market.However, analyst John Musk notes that Centrica has been challenged by the current economic environment as it has faced aggressive price competition. Therefore, the broker now expects targets in home services to be reached one year later in 2013.While its earnings per share forecasts have been trimmed by 2-4% for 2011, the broker says the "valuation still stacks up", as it continues to expect the group to deliver a growth rate of 10% in earnings per share over the next five years along with strong cash flows.Despite forecasting a delay in growth, Nomura remains a 'buyer' of the stock, and confirms a target price of 395p.