Centrica gets a leg-up from RBC upgrade to 'outperform'

27th Jul 2015 10:37

(ShareCast News) - Centrica got a boost after RBC Capital Markets upgraded the stock to 'outperform' from 'underperform' and raised its price target to 320p from 240p, saying it has fundamentally changed its view following deeper analysis of retail operations."As a result of attractive financials and Centrica's unique positioning in retail markets, led by the Connected Home, we flip our recommendation to outperform," said RBC."We continue to see some negative Competition and Market Authority impacts but cost-efficiencies could offset much of this. Furthermore, Centrica is significantly ahead of peers in addressing the opportunities from the emerging Connected Home ecosystem," the Canadian bank added.It pointed to the company's upcoming strategy day on 30 July, which it expects to focus on four areas: efficiencies, exploration and production, North America and Connected Home.RBC said it reckons Centrica will announce significant efficiencies as it tries to better exploit economies of scale. It expects £200m in savings across British Gas with additional synergies in the US and elsewhere.In addition, it expects Centrica to de-emphasise upstream E&P and continue to focus on reducing capex and lifting costs.As far as North America is concerned, it said the US offers a key avenue for growth. However, the retail environment is competitive and we expect Centrica to use its Connected Home experience in the UK to roll out Hive to US markets."We see Hive leading to a fundamental brand reappraisal among consumers, differentiating Centrica from other suppliers, refreshing the Services offering, delivering cost savings and creating new revenue streams," said RBC.At 09:50, shares were up 1.7% at 276.50p.