Francesco Starace increased profits at Italy’s biggest power company since he became chief executive officer of Enel SpA and that has analysts anticipating better earnings from his continued efficiency. Investors aren’t showing such enthusiasm.
While Enel has the highest price-to-earnings multiple among its peers in Europe, the ratio based on earnings estimates for next year is below the industry average, data compiled by Bloomberg show, revealing shareholders’ lack of confidence in analyst forecasts.
“It will take twelve to eighteen months for us to get the full message across”, Starace, 59, said in an interview at his Rome headquarters. “Investors need facts. If you can give them clarity that the debt is being paid, the dividend is coming, and the cash flow is robust, that is what they want.”
Starace has been selling assets, cutting costs, and simplifying the corporate structure since his arrival in May 2014. This includes restructuring Enel’s complex Latin American activities made up of 80 different legal entities.
“Enel has one of the most interesting equity stories in the sector. It has transformed itself from a quasi-monopoly in Italy to a well-diversified company in Southern Europe, Latin America, and renewables”, said Oscar Najar Rios, a Madrid-based analyst at Santander Investment Bolsasv,
Enel’s profitability has been rising faster than its European peers, it has almost three times the sales growth of its competitors, and its indebtedness compared with profit has decreased faster than average.
Still, the stock has fallen 4.7 percent in the past 12 months, cutting the company’s market value to 39.7 billion euros (USD 45 billion). The company had 13 billion euros of cash on hand at the end of last year. Starace said the money will be used for growth and to increase the dividend.
