EON SE, Germany’s biggest utility, slumped to the lowest in almost 10 years in Frankfurt trading a day after saying earnings would be lower this year.
EON fell 3.1 percent to 12.805 euros, the lowest since April 2003. About 21.7 million shares were traded, 92 percent more than the three-month average.
“We fear the earnings outlook is bleak,” Bobby Chada and Alexandra Economides, analysts at Morgan Stanley, said today in a note. They cut their share-price target by 15 percent to 11 euros and reduced estimates for earnings per share by 8 percent for 2014 and by 17 percent for 2015.
European utilities are struggling to cope with weaker demand and a slower economic outlook. At the same time Germany plans to exit nuclear energy by 2022. EON, which scrapped previous profit forecasts for 2013 in November, is selling assets worth as much as 20 billion euros ($27 billion) to cut costs.
EON estimates underlying earnings will drop to 2.2 billion to 2.6 billion euros this year from 4.3 billion euros in 2012. That compares with an initial estimate of 3.2 billion to 3.7 billion euros.
The planned reduction of capital spending from 6 billion euros in 2013 to 4 billion to 4.5 billion euros in 2015 is “less aggressive than we had hoped,” the Morgan Stanley analysts wrote.
A ratio of less than three for net debt to earnings before interest, tax, depreciation and amortization as targeted by EON “looks unlikely before 2016,” according to the analysts.