JPMorgan added Centrica, the London-listed owner of British Gas, to its Analyst Focus List on Friday, telling clients the share price had fallen further than this year's earnings downgrades justify.
Analyst Pavan Mahbubani kept an overweight rating on the FTSE 100 utility and argued the stock could deliver substantial upside if investors refocus on cash generation across upstream gas, trading and services rather than near-term margin noise. The bank's focus list is reserved for its highest-confidence stock picks among European equities, and the call landed as gilt yields dominated conversation across the City.
Why the bank thinks the selloff went too far
Mahbubani acknowledged three worries that have dominated recent meetings with shareholders: repeated cuts to earnings forecasts, rising bad debts in the retail book, and anxiety that artificial intelligence could reshape power demand in ways that hurt legacy suppliers. He did not dismiss those risks, but he said the market had priced in a worse outcome than Centrica's own guidance implied.
Centrica has spent the past year reminding investors that its earnings mix is broader than the household brand on vans and bills. Storage, optimisation and North Sea production still matter to free cash flow even when regulated retail margins are squeezed. JPMorgan's models point to mid-teens earnings per share growth between 2026 and 2030 if commodity spreads normalise and customer losses stabilise.
How Centrica fits the volatile utility trade
Goldman Sachs, in a separate September note, also maintained a buy rating and highlighted Centrica's valuation relative to European peers, citing inflecting upstream earnings and optionality on balance-sheet capacity if debt targets ease. That research landed the same week Ofgem proposed changes to grid-connection rules, a reminder that policy shifts can move utility multiples as quickly as commodity prices.
For UK fund managers, Centrica has become a hedge against both directions of the energy story. When oil and gas prices rise, upstream cash tends to improve; when prices fall, retail churn often eases as customers stay put. The stock's recent weakness partly tracked a broader de-rating of UK lenders and domestic cyclicals as long-dated gilt yields spiked, not a single operational shock at British Gas.
What shareholders watch next
Investors will get another read on customer balances and hedging when Centrica reports interim management statements and when winter demand data arrive. Regulators are also watching how suppliers communicate tariff changes after a volatile year for wholesale prices. None of that removes the political glare on household bills, but JPMorgan's argument is that the equity already reflects a pessimistic view of those headlines.
Trading on Monday will show whether other sell-side teams follow the focus-list move or treat it as a contrarian outlier. For now, the call gives income-focused funds a named large-cap idea at a moment when many are hiding in global miners and banks instead of UK domestic names.
Retail politics and the bill cycle
Centrica's consumer division still sets the tone for media coverage even when upstream earnings drive the equity story. Ofgem's price-cap methodology and the timing of default tariff announcements can move the share price on days when production numbers are quiet. Mahbubani's note argued that bad-debt provisions in the retail book are manageable relative to the group's balance-sheet flexibility, but MPs will continue to ask about prepayment meter practices and customer service metrics whenever bills dominate headlines.
Funds that own Centrica for income have watched the dividend policy closely after earlier cuts during the energy crisis. A focus-list upgrade does not change payout guidance on its own, yet it signals that at least one major bank thinks free cash flow can support both investment in hydrogen-ready assets and shareholder returns if commodity markets cooperate. Competitors such as SSE and Octopus Energy's supply arm face similar scrutiny on hedging strategies, which keeps relative valuation gaps in focus through the winter.