AGL Ltd (ASX: AGL) shares got a boost yesterday after the company reported a solid set of full-year profit results and declared a marginally higher dividend.
The shares are still down more than 15% over a 12 month period however, posing the question, will they continue to recover off these lows?
Brokers UBS and RBC Capital Markets both have bullish share price targets on AGL, which I'll get to shortly.
First, let's look at the company's profit result.
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Solid profit result across the board
AGL reported a net profit of $756 million, up $644 million from the previous year, while underlying EBITDA was up 2% to $2.1 billion, in line with guidance.
The company declared a final fully-franked dividend of 26 cents per share, up from 25 cents last year, and said it was targeting a dividend payout ratio of 55% to 60% of underlying net profit.
The final dividend will be paid on 24 September.
On earnings, the company said it was expecting EBITDA to be between $1.9 billion and $2.2 billion in FY27, while underlying net profit should be $470 million to $670 million.
AGL was also targeting $50 million in sustainable cost savings in FY27.
AGL Managing Director Damien Nicks said of the result:
Our strong result reflected excellent business performance across AGL. The strength of our integrated business helped mitigate the impact of softer market conditions. Continuing from the first half, Customer Markets saw growth in customer services, positive customer satisfaction outcomes, and a return to more sustainable margins. The improved availability and flexibility of our generation asset portfolio, including the continued strong performance of our batteries, supported resilience against a period of low price volatility in the NEM, which was driven by a combination of milder weather, strong NEM-wide renewable generation and coal fleet availability, battery capacity growth, and lower transmission constraints.
Brokers think AGL shares look cheap
UBS said AGL's result was in line with consensus expectations while the outlook for FY27 was better than expected.
The broker added:
With flat consensus earnings over FY27-29 the stock should trade favourably on upside risk to medium term earnings per share, notwithstanding a wide range of outcomes are possible.
UBS has a price target of $10.40 on AGL shares compared to $8.60 at the time of writing.
RBC Capital Markets said AGL's earnings were slightly below their expectations while the dividend was better than expected.
RBC has a price target of $11 on the company. AGL is valued at $5.54 billion.
