AGL Energy extends gains as Morgan Stanley upgrades stock
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The news: AGL Energy was one of the best performing stocks across the ASX 200 today as Morgan Stanley upgraded its rating on the electricity generator following better-than-expected FY25 earnings guidance.
The numbers: AGL shares were up 4.1% to $11.51 by 1:40pm AEST, having closed 2.04% higher on Wednesday after it posted strong FY24 earnings and announced the acquisition of battery developer Firm Power and solar project firm Terrain Solar.
Morgan Stanley upgraded AGL from 'equal-weight' to 'overweight' and raised its price target from $10 to $12.88.
Elsewhere, Morgans raised its price target from $10.85 to $11 but retained its 'neutral' rating on AGL, with analyst Tom Allen noting that despite enjoying more resilient gas margins, downside and upside risks are evenly balanced at its current share price.
Macquarie kept its 'neutral' rating and $11.28 price target unchanged, noting that higher earnings are offset by near-term increases to capital expenditure.
Goldman Sachs maintained its 'neutral' rating but hiked its price target 9% to $11.30, revising up its EBITDA estimates by 3% in both FY25 and FY26.
The context: Morgan Stanley analysts predict that AGL offers a one-year total shareholder return of 22% on a risk-adjusted basis.
They noted that the company's FY25 earnings guidance "surprised us to the upside", with AGL's leverage to volatility offsetting moderation in baseload prices. They said they see modest earnings per share growth in FY26, while AGL's balance sheet "appears sound".
What they said: "We turn positive on AGL, where hard work on plant and customer is paying off, and prospects for energy prices and demand are favourable," the Morgan Stanley analysts said.
The sources: Morgan Stanley research, Macquarie research, Goldman Sachs research, Morgans research
