On Monday, UBS began coverage on Centuri Holdings Inc (NYSE: CTRI) stock, assigning a Buy rating and setting a price target of $30.00. The firm highlighted the company's growth potential amid increasing investments in the electric grid, which could enhance both earnings and valuation multiples.
Centuri Holdings, which recently went public in mid-April, is seen as well-positioned to capitalize on the growing demand for electric grid investments.
UBS forecasts a 24% EBITDA growth for Centuri from 2024 through 2026, bolstered by an anticipated 9% increase in core Electric Utility revenues. This growth is expected to stem from higher capital expenditures in the electric utilities sector and the addition of discrete projects in transmission and adjacent markets.
UBS anticipates that Centuri Holdings will benefit from strategic company-wide initiatives aimed at expanding its project mix and improving operational efficiency. These efforts are projected to lead to margin expansion for the company.
Despite missing its fourth quarter 2023 and first quarter 2024 estimates, the firm believes that Centuri Holdings will gain investor confidence as it overcomes near-term challenges.
UBS suggests that as Centuri establishes its reputation as a public entity and demonstrates the consistency and predictability of its business model, investors could reward the company with 1-2 times multiple expansion, particularly as it enters a period of accelerated earnings growth in 2025 and 2026.
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