Fugro Dynamic Top Pick List update: Removing Fugro

Fugro was scheduled to release its 1Q25 results on April 24. Following the distribution of the company-compiled consensus on Monday after close, Fugro issued a profit warning yesterday. Compared to an exceptionally strong 1Q24, where revenues grew by 9%, the 1Q25 consensus anticipated a -4.8% revenue decline (KBCS -4.0% est.), but the actual decline was -11%. The 1Q25 EBIT consensus called for €28m (KBCS €29m est.), which turned out to be only slightly positive.
Given the current US stance on offshore wind and the economic and geopolitical turmoil, we expected a mismatch between reduced/lost offshore wind order intake and renewed O&G order intake. The intensified tariff war, coinciding with uncertainty and a diving oil price, is now hindering investment decisions in traditional energy markets and offshore wind markets outside the US too, which was previously not part of our scenario.
While at the FY24 release in late February, Fugro was still guiding for full-year back-end loaded topline growth, the company is now reassessing its FY revenue outlook, a process expected to be finalized once greater clarity materializes. Against the current market backdrop, we would therefore not be surprised to see Fugro issuing updated revenue guidance not before the 1H25 release in early August.
In a substantial model overhaul, we no longer bank on topline growth in 2025 but now pencil in a 6% topline decline. Considering the operating leverage inherent to the business model, this has a considerable impact on our EBIT forecasts and recommendation. While valuation remains attractive especially for investors willing to look beyond 2025 we fail to see short term share price triggers hence we remove the name from our Dynamic Top Pick List.
We revised our rating to Accumulate (previously Buy before going ‘Under Review') with a €15 TP (previously €28.5). A flash note is being published today.