National Grid could see its debt upgraded by a key rating agency before too long, according to City analysts.
The company's shares have fallen back in the last couple of months since it reported a dip in full year profits, amid concerns about its balance sheet. But they have edged up 0.5p to 536p today following a buy note from Nomura with a 715p price target, issued ahead of a trading update due at the end of this month. Nomura said:
"We have updated our forecasts for full year results in May, and ahead of the interim management statement scheduled for 23 July. Our above consensus earnings per share forecasts have been further uplifted by 3% this year and 5% next year. We believe the risk reward still remains compelling (post our May upgrade) and that the upcoming statement will focus the market on the compelling valuation metrics of National Grid; 9.3 times PE, 7.1% dividend yield and 6% earnings per share compound annual growth rate over 5 years.
"Furthermore, we expect Moody's to take National Grid off negative watch in the coming weeks which will remove some doubts around balance sheet sustainability.
"We continue to believe the market has overplayed the credit risk of the company. We do not see a rights issue/placing as likely."
