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All You Need to Know About TechnipFMC's (FTI) Analyst Day
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At its 2021 Analyst Day on Tuesday, oilfield services provider TechnipFMC plc (FTI - Free Report) presented a summary of its 2025 operational targets. The company’s intermediate-term financial performance will be largely driven by its Subsea unit, which constitutes some 85% of its adjusted EBITDA and 95% of backlog. FTI also looks poised to prioritize shareholder distribution and improve free cash flow conversion.
TechnipFMC said it expected subsea inbound orders (including services) to reach nearly $8 billion by 2025 — in line with or eclipsing the 2019 peak levels. In particular, FTI sees subsea services orders to grow approximately 35% (from $1.1 billion this year) through the middle of this decade. Subsea revenues are set to reach $7 billion during that time frame, while adjusted EBITDA is likely to jump more than 85% from 2021 guidance midpoint to $1.05 billion. Adjusted EBITDA margin is forecast to be around 15%, expanding from the 10.5% targeted for 2021, primarily built on the company’s increased productivity and utilization.
Over the next few years, TechnipFMC believes that its Subsea 2.0 platform — a new, technologically sophisticated suite of products that improves project economics by cutting down on the dimensions of the equipment installed underwater — would enjoy fast-track adoption. The next-generation, environment-friendly all-electric system should increase opportunities further.
As far as the Surface Technologies unit is concerned, the guidance was less specific though FTI envisions incremental EBITDA margins of roughly 30% in 2025.
Throwing light on its financial projections, the company is looking to convert 40-50% of its adjusted EBITDA into free cash flow by 2025. This will be facilitated by debt reduction, allowing the leading manufacturer and supplier of integrated technology solutions for the energy industry to lower its annual interest expense. Its capital budget, on the other hand, is expected to be restricted between 3.5% and 4.5% of revenues. TechnipFMC aims to bring the gross debt down to $1.3 billion in the next four years (compared to $2.3 billion as of Sep 30) with a cash balance of at least $800 million.
The company is also expecting to introduce a sustainable dividend starting in the second half of 2023
With the rise of ESG (Environmental, Social and Governance) investing and a broad-based transition toward clean energy, FTI is striving to focus on the opportunities created by efforts to reduce carbon footprint. As part of that, the company’s newly established ‘New Energy Ventures’ could win orders worth $1 billion through 2025, with 60% coming from Europe (chiefly hydrogen) and 40% from North America (mainly carbon transportation and storage). By 2030, TechnipFMC sees the market size for such services soaring to some $80 billion.
Zacks Rank & Stock Picks
TechnipFMC currently carries a Zacks Rank #3 (Hold). While FTI shares have largely underperformed the industry in a year (-20.8% versus +33.6%), we believe that the company is trending toward the right direction, which will help the stock catch up.
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All You Need to Know About TechnipFMC's (FTI) Analyst Day
At its 2021 Analyst Day on Tuesday, oilfield services provider TechnipFMC plc (FTI - Free Report) presented a summary of its 2025 operational targets. The company’s intermediate-term financial performance will be largely driven by its Subsea unit, which constitutes some 85% of its adjusted EBITDA and 95% of backlog. FTI also looks poised to prioritize shareholder distribution and improve free cash flow conversion.
TechnipFMC said it expected subsea inbound orders (including services) to reach nearly $8 billion by 2025 — in line with or eclipsing the 2019 peak levels. In particular, FTI sees subsea services orders to grow approximately 35% (from $1.1 billion this year) through the middle of this decade. Subsea revenues are set to reach $7 billion during that time frame, while adjusted EBITDA is likely to jump more than 85% from 2021 guidance midpoint to $1.05 billion. Adjusted EBITDA margin is forecast to be around 15%, expanding from the 10.5% targeted for 2021, primarily built on the company’s increased productivity and utilization.
Over the next few years, TechnipFMC believes that its Subsea 2.0 platform — a new, technologically sophisticated suite of products that improves project economics by cutting down on the dimensions of the equipment installed underwater — would enjoy fast-track adoption. The next-generation, environment-friendly all-electric system should increase opportunities further.
As far as the Surface Technologies unit is concerned, the guidance was less specific though FTI envisions incremental EBITDA margins of roughly 30% in 2025.
Throwing light on its financial projections, the company is looking to convert 40-50% of its adjusted EBITDA into free cash flow by 2025. This will be facilitated by debt reduction, allowing the leading manufacturer and supplier of integrated technology solutions for the energy industry to lower its annual interest expense. Its capital budget, on the other hand, is expected to be restricted between 3.5% and 4.5% of revenues. TechnipFMC aims to bring the gross debt down to $1.3 billion in the next four years (compared to $2.3 billion as of Sep 30) with a cash balance of at least $800 million.
The company is also expecting to introduce a sustainable dividend starting in the second half of 2023
With the rise of ESG (Environmental, Social and Governance) investing and a broad-based transition toward clean energy, FTI is striving to focus on the opportunities created by efforts to reduce carbon footprint. As part of that, the company’s newly established ‘New Energy Ventures’ could win orders worth $1 billion through 2025, with 60% coming from Europe (chiefly hydrogen) and 40% from North America (mainly carbon transportation and storage). By 2030, TechnipFMC sees the market size for such services soaring to some $80 billion.
Zacks Rank & Stock Picks
TechnipFMC currently carries a Zacks Rank #3 (Hold). While FTI shares have largely underperformed the industry in a year (-20.8% versus +33.6%), we believe that the company is trending toward the right direction, which will help the stock catch up.
Some better-ranked players in the energy space are ConocoPhillips (COP - Free Report) , EOG Resources (EOG - Free Report) and Suncor Energy (SU - Free Report) . All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ConocoPhillips has a projected earnings growth rate of 705.2% for the current year. The Zacks Consensus Estimate for COP’s current-year earnings has been revised 23.8% upward over the last 60 days.
ConocoPhillips beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 13%. COP shares have gained around 89.1% in a year.
EOG Resources has a projected earnings growth rate of 491.1% for the current year. EOG's consensus estimate for the current year has been revised 15.5% upward over the last 60 days.
EOG Resources beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 29.8%. EOG has rallied around 104% in a year.
Suncor Energy has an expected earnings growth rate of 318.2% for the current year. The Zacks Consensus Estimate for SU's current-year earnings has been revised 27% upward over the last 60 days.
Suncor Energy beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice. It has a trailing four-quarter earnings surprise of roughly 7.5%, on average. SU has rallied around 69.5% in a year.