Italgas Surges to Near Two-Month Peak Following Citi's Buy Upgrade

Italgas SpA's stock climbed sharply on Tuesday, nearing a two-month high, following a bullish upgrade from Citi. The Italian utility operator saw shares rise 2.24%, hitting €10.46 - a level not seen since April 21. Citi raised its target price to €11.6, signaling fresh confidence in the company's prospects.

The brokerage highlighted a gearing up of Italy's gas distribution tender process, describing 2026 as a pivotal year. After years of slow progress, Citi noted six to eight tender awards could materialize this year, a stark jump from the historical average of about one annually. Four tenders have already been granted, with two under review and six more bidding invitations sent out.

Moreover, Citi boosted its estimates for synergies stemming from Italgas' acquisition of 2i Rete Gas. Forecasts now show cost savings reaching €300 million by 2031, a substantial upgrade from the previous €180 million estimate. This points to deeper integration benefits than initially anticipated.

Despite these upbeat developments, Italgas is trading well below its European regulated utility peers on a forward earnings multiple basis. Citi's analysis indicates a 9.8x multiple on projected 2030 earnings, while competitors trade around 13.8x. This valuation gap raises questions about market recognition of the stock's earnings power.

On the earnings front, Citi revised its compound annual growth rate for Italgas' earnings per share upwards to roughly 10% through 2031, from an earlier 8%. The 2031 EPS estimate stands at €1.16, nearly 9% higher than the prevailing market consensus at the time of the report.

Looking ahead, the company's capital markets day scheduled for June 23 is expected to provide fresh targets and unveil strategic priorities that could further reshape expectations. Investors will be watching for indications of how Italgas plans to capitalize on the accelerated tender activity and synergy potential.

Italgas has carved out a strong spot in Italy's energy sector, but with its shares still discounted relative to peers, one might wonder if the market has fully priced in these catalysts or if opportunities remain to be unlocked. The coming weeks could be telling.