On Wednesday, RBC Capital adjusted its outlook on Worley Ltd (WOR:AU) (OTC: WYGPY), reducing the share price target to AUD18.00 from the previous AUD18.50. Despite this change, the firm maintained its Outperform rating on the energy services company’s stock.
The revision of the price target comes as RBC Capital shifts the forecast timing for the material CP2 LNG Final Investment Decision (FID). The analyst from RBC Capital stated that the long-term investment thesis for Worley remains intact, citing the company's potential for increased earnings and higher margin leverage from its involvement in energy transition work and sustainability-linked contracts.
Worley is recognized for its global reach in delivering project and asset services for the energy, chemicals, and resources sectors. As the world increasingly focuses on sustainable energy solutions, the company's expertise in energy transition is expected to contribute positively to its financial performance.
The Outperform rating indicates that RBC Capital anticipates Worley's stock to perform better than the average total return of stocks analyzed by the firm within the same sector. The maintained rating suggests confidence in Worley's business strategy and growth prospects despite the minor adjustment in the price target.
Investors and market watchers will likely monitor Worley's progress on the CP2 LNG project and its impact on the company's earnings. The energy sector's focus on sustainability and transition to cleaner energy sources is a critical area of growth, and Worley's positioning in this domain appears to be a key factor in RBC Capital's assessment.
In other recent news, Worley Ltd has seen notable adjustments in its financial outlook by two major firms, Goldman Sachs and Citi. Goldman Sachs shifted its rating from Neutral to Buy and increased the price target to AUD17.50, up from AUD17.25.
The firm's decision was influenced by Worley's average next twelve months premium realigning with its three-year average of 11%. According to Goldman Sachs, this relative valuation is expected to continue into the next year plus one earnings period.
On the other hand, Citi refined its financial model for Worley, leading to a slight reduction in the price target to AUD20.00, from AUD20.50. Despite this, Citi maintained its Buy rating.
The firm's revised forecasts indicate over 5% upside to the FY24 consensus EBITA forecasts, attributed solely to revenue seasonality. Furthermore, Citi's projections for FY25 factor in potential revenue from the CP2 LNG project, which is currently pending approval.
These are recent developments that reflect the ever-changing dynamics in the financial market. Both Goldman Sachs and Citi have shown confidence in Worley's potential, suggesting that investors should keep a close eye on the company's performance moving forward.
InvestingPro Insights
As RBC Capital maintains its optimistic stance on Worley Ltd, a glance at the real-time data from InvestingPro provides additional context for investors considering the company's stock. Worley's market capitalization stands at a robust $5.15 billion USD, reflecting its significant presence in the energy services sector. Despite trading at a relatively high earnings multiple with a P/E ratio of 31.43, the adjusted P/E ratio for the last twelve months as of Q2 2024 shows a slight improvement at 29.29.
From a profitability perspective, Worley is expected to see net income growth this year, with analysts predicting the company will be profitable. This aligns with the firm's reported positive revenue growth of 15.21% over the last twelve months as of Q2 2024, which is a strong indicator of its operational success. Additionally, the company's dividend yield as of March 2024 is an attractive 3.92%, paired with a substantial dividend growth of 38.45% over the last twelve months as of Q2 2024, which could be appealing to income-focused investors.
However, it's important to note that Worley is currently trading near its 52-week low and suffers from weak gross profit margins, which are at 6.66%. This highlights potential areas of concern that investors may want to monitor. For those seeking deeper insights, InvestingPro offers further analysis and tips. For example, there are 6 additional InvestingPro Tips available that could provide a more comprehensive understanding of Worley's financial health and future prospects. Interested investors can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, gaining access to these valuable tips and more.
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