RBC Capital Markets published a sector note on Thursday that reshuffles its recommendations for a cluster of Southern European utilities. The brokerage downgraded Portuguese grid operator REN - Redes Energeticas Nacionais to "underperform" and reduced its view on Italian electricity transmitter Terna to "sector perform," citing what it sees as stretched market valuations. At the same time, RBC kept Italgas at "outperform" and named it its top pick in the group.
RBC raised REN's price target to 3.40 from 2.90. That target sits below REN's trading level of 3.79, which the broker says implies a negative total return of roughly 6% from the current market price. For Terna, RBC's target was nudged up to 10.00 from 9.60 versus a trading price of 9.62.
The brokerage acknowledged improved regulation for REN and noted potential upside related to tax developments, but concluded that such improvements look priced into the stock. RBC highlighted that REN currently trades at a premium to peers such as RED and is approaching Terna's valuation, despite RBC's forecast of negative growth in gas transport, a business line that accounts for over one-third of REN's 3.50 billion Portuguese regulatory asset base (RAB).
On Terna, RBC noted the company trades at a relatively high multiple - approximately 19 times 2026 estimated earnings compared with a sector average of 16 times. Under RBC's view, Terna's multiple would decline to about 15.2 times by 2030, while the sector average would sit at around 13.9 times.
Across its coverage, RBC said it has positioned its EPS estimates roughly 8% below consensus for the 2026-28 period. The downgrade to consensus stems in part from expected increases in the IRAP tax and from an 850 million hybrid bond issued in January 2026, items that weigh on projected earnings.
RBC's modelling for REN includes a fall in natural gas transport EBITDA from 113.7 million in 2025 to 104 million by 2030. The broker estimated REN's 2026 EPS at 0.24 and forecast net debt to rise to 2.61 billion, reflecting the combination of lower EBITDA from gas transport and REN's capital structure.
Italgas, the Italian gas distributor, retained its "outperform" rating and received a modest target increase to 11.00 from 10.50. RBC pointed out that Italgas trades at about 13.9 times 2026 estimated earnings, the lowest multiple within the peer group, versus a sector average above 16 times. The firm projects annual EPS growth for Italgas of around 9% through 2030.
RBC also noted that, even if it excludes half of an anticipated 250 million in annual pre-tax cost savings - the portion expected to be shared with consumers from 2032 - Italgas's 2030 price-to-earnings ratio would still be approximately 10.6 times.
Snam received the largest absolute uplift in target, to 6.40 from 5.40, while remaining at "sector perform." RBC said the increase followed Snam's 2026-30 strategic plan, which includes 14.4 billion in investments - about 7% more than its previous plan - and supports an expected RAB growth of roughly 5% per year.
Spain's Redeia had its target trimmed to 15.00 from 15.60 and was kept at "sector perform" after RBC reduced its EPS forecasts by roughly 7% on average over 2026-29, partly reflecting hybrid issuance. The note also referenced an S&P downgrade of Redeia to BBB+ earlier in March.
Enagas remained on RBC's underperform list with a 13.00 target. The broker estimated Enagas's 2030 price-to-earnings ratio at about 17.1 times - the highest in the coverage group - and flagged that consensus may be underestimating regulatory risk ahead of Spain's CNMC publishing its 2027-32 gas remuneration framework before Easter.
RBC further forecast that RCS revenues would be halved to roughly 19 million from 2027, a reduction not reflected in consensus EBITDA estimates, which were more than 30 million above RBC's 2027 figure. The report also observed that year-to-date sovereign 10-year yields in Southern Europe have risen by about 20-30 basis points, a move that RBC said favors Italy's inflation-linked regulatory model over Spain's fixed six-year WACC framework.
RBC's repositioning signals the broker's greater emphasis on relative valuation, regulatory risk and forthcoming tax and financing items that will affect earnings and leverage across Southern Europe's utility complex. The firm elevated Italgas as the preferred name in the peer group on both relative valuation and earnings growth metrics, while highlighting specific downside risks in REN, Terna and Enagas tied to evolving regulatory and tax environments.