On Thursday, JPMorgan (NYSE:JPM) reinstated coverage on Ferrovial SA (FER:SM) (OTC: FRRVF), issuing an Overweight rating with a new price target of €49.00. The firm placed the infrastructure operator on its Positive Catalyst Watch ahead of its 2024 results due on February 27. The move reflects a shift from a Not Rated (NR) status to Overweight (OW), as opposed to the Neutral (N) rating before the restriction.
The analyst pointed to the company's ability to navigate through potential challenges related to the Schedule 22 provision at its 407-ETR toll road, which is expected to have an impact of approximately C$394 million in the first year. Despite this headwind, the firm believes that the market has been well-informed about the issue and that the negative effects will likely be outweighed by significant price increases at Ferrovial's managed lanes in the United States and the 407-ETR.
Ferrovial's stock has already seen a robust performance, with a 19% increase since January 2024. However, JPMorgan's sensitivity analyses suggest there is still room for growth, given Ferrovial's demonstrated pricing power. The firm also anticipates an increase in the company's Net Tangible Assets (NTO) value as valuations move beyond equity invested.
Additionally, JPMorgan notes the potential for Ferrovial to secure more Managed Lanes (ML) projects, presenting further opportunities for the company's growth. The €49.00 price target is based on a Sum-of-the-Parts (SOTP) valuation and represents a 24% upside from the current share price.
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