On Thursday, Citi adjusted its financial outlook for Worley Ltd (WOR:AU) (OTC: WYGPY), an engineering company. The firm's price target was lowered to AUD20.00 from AUD20.50, while the Buy rating was sustained. The adjustment reflects a refined model to better predict the company's financial performance, including aspects like seasonality, procurement, and cash conversion.
The analyst from Citi expressed confidence in Worley's potential, pointing out that the revised forecasts indicate over 5% upside to the FY24 consensus EBITA forecasts, attributed solely to revenue seasonality. This optimism persists despite the market consensus, which oddly assumes zero percent top-line growth for FY24, excluding procurement, contradicting the company's growth guidance.
Citi's evaluation of Worley's financials is based on a detailed analysis which puts them 5% ahead of the market on net profit after tax and amortization (NPATA) due to revenue expectations.
The firm's projections are also more bullish for FY25, factoring in potential revenue from the CP2 LNG project, which is currently pending approval from the Federal Energy Regulatory Commission (FERC). While Citi's EBITA margin forecasts align with the consensus for FY25, their NPATA forecasts are 8% higher, driven by the anticipated inclusion of CP2 LNG in their calculations.
The slight reduction in the target price, cut by 3% to AUD20.00, is a nuanced move by Citi that reflects careful consideration of various financial aspects of Worley's business. The Buy rating indicates that, despite the price target adjustment, Citi believes Worley's shares still hold value for investors. The company's stock performance will continue to be monitored by investors as it navigates the financial year ahead with these revised expectations.
InvestingPro Insights
In light of Citi's recent financial outlook adjustment for Worley Ltd, it's noteworthy to consider some key metrics and insights from InvestingPro. With a market capitalization of $5.84 billion, Worley is trading at a high earnings multiple, with a P/E ratio of 36.85. This valuation reflects expectations of future growth, which aligns with the analysts' predictions that the company will be profitable this year, a sentiment supported by the company's profitability over the last twelve months.
InvestingPro Tips suggest that Worley's net income is expected to grow this year, which may provide a positive outlook for investors considering the stock. Despite trading at a high earnings multiple, the company operates with a moderate level of debt, which could be seen as a sign of prudent financial management. However, investors should be aware of the company's weak gross profit margins, which stand at 6.66% for the last twelve months as of Q2 2024.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights, with PRONEWS24 providing an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more InvestingPro Tips available that can provide further guidance on whether Worley's current market performance and future projections align with their investment strategy.
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