Analyst Note| Preston Caldwell |
We're lowering our fair value estimate for TechnipFMC to $24 per share (EUR 18) from $25 (EUR 21), mainly because of industry-specific factors. We’re particularly concerned about the low profit margins among the offshore engineering and construction companies (TechnipFMC, Saipem, and Subsea 7). Their financial performance looks dismal compared with the large diversified-services companies, whose operating margins have soared past prepandemic levels. To some extent this is attributable to long-lasting contracts employed in offshore E&C (meaning their results tend to lag other oil-service companies), but this explanation doesn't entirely assuage our concerns. Therefore, for now we are reducing midcycle operating margins by an average 100 basis points for the group. However, TechnipFMC has fared somewhat better than the group over the last year, driven by uptake of its unique integrated project offerings. We expect this outperformance to continue.