The improvement in expectations of economic recovery has contributed to the positive tone of equity markets
In these early months of 2021, equity markets extended the upward movement that began in March 2020, thus reaching new highs.
The continued rally during 2021 was supported by the expectations of a stronger economic recovery than that forecasted in late 2020, which resulted in improved revisions to analysts' estimates for 2021-2023 earnings.
Although the continuing Covid-19 pandemic has resulted in prolonged lockdowns, investors expect fiscal policies to have a positive impact on the earnings of listed companies as vaccination campaigns progress and economic activities gradually reopen.
With real bond yields that in the Eurozone have come back to their lows of early February, the shares of the regulated utilities proved to be once again attractive
In March there was a halt in the raising of interest rates, with the dying down of the fears that had emerged in February, of possible restrictive measures adopted by the Fed in the face of an overheating of prices due to the acceleration of economic growth in the United States. This more reassuring picture of the continuity of monetary policies has produced, albeit selectively, a new interest in listed companies with attractive valuations and a defensive profile, being able to maintain their margins even in the face of inflationary pressures.
Regulated utilities have been one of the more favored segments in this perspective.
In April, in the wake of a confirmed hyper-expansionary attitude of Central Banks and macroeconomics that continued to beat expectations, global equity indices posted new highs. However, the FTSE MIB fell by 1.9%, reflecting the correction in the oil and automotive sectors, which had driven the index rally in the first three months of 2021.
Italgas stock price also reflects Company-specific factors
Mostly in March 2021, Italgas has recorded a significant price increase (+13.4%) in the wake of the renewed investor interest in its sector. Such rally allowed Italgas to outperform both regulated peers and the Eurozone industry index, which was up 6.7%. Besides the favorable sentiment towards utilities, a few Company-specific factors contributed to drive the strong performance of the stock price. Firstly, on 10 March 2021, Italgas released both earnings and dividends per share for the fiscal year 2020 that exceeded expectations. Secondly, the news about the awarded Atem Torino-1 has increased the visibility of Italgas growth due to the linked capex plan.
In April 2021, the stock price has slightly declined (-2%), in line with the FTSE MIB (-1,9%), while underperforming the Stoxx Euro 600 Etilities, which has risen by 1.2%.
Considering the overall scenario and the Company's solid fundamentals the correction of Italgas’ share price in April should be interpreted as a mitigation of the previous outperformance of March.
Italgas vs Stoxx Euro 600 Utilities and FTSEMIB (Base 4 Jan.2021=100)