AGL Energy's (ASX:AGL) strong share price reaction is due to its raised underlying earnings before interest, taxes, depreciation, and amortization guidance and higher interim dividend, according to a Wednesday report by Jefferies.

On Wednesday, the company reported fiscal first-half underlying earnings of AU$0.523 per share and revenue of AU$7.04 billion.

The company expects fiscal year 2026 underlying earnings before interest, taxes, depreciation, and amortization of between AU$2.02 billion and AU$2.18 billion, up from the previous range of AU$1.92 billion to AU$2.22 billion

It also expects underlying net profit after tax for the fiscal year between AU$580 million and AU$680 million, up from its prior guidance of AU$500 million to AU$700 million.

The board declared an interim dividend of AU$0.24 per share, up from AU$0.23 a year earlier.

The company's growth in the customer market business and improved fleet availability contributed positively to the results, Jefferies said.

AGL's net cost savings of AU$50 million for fiscal year 2027 provide investors with the confidence that dividends can be maintained at the same levels for the next few years, Jefferies noted.

Jefferies has a buy rating on the company and raised its price target to AU$12.76 from AU$12.24.

Shares of the company rose 14% in recent Thursday trade.