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FERROVIAL: 4Q’19 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results:
Sales: € 1.762 Bn (vs. € 1.479 Bn BS(e) and € 1.508 Bn consensus);
EBITDA: € 88.0 M (-37.1% vs. -21.2% BS(e) and -22.9% consensus);
EBIT: € 518.0 M (+54.2% vs. +58.7% BS(e) and -67.0% consensus);
Net Profit: € 372.1 M (vs. € 110.87 M BS(e));
FY2019 vs. FY2018 Results:
Sales: € 6.054 Bn (+5.5% vs. +0.6% BS(e) and +1.1% consensus);
EBITDA: € 121.0 M (-75.0% vs. -70.4% BS(e) and -70.9% consensus);
EBIT: € 401.0 M (-8.4% vs. -5.0% BS(e) and € -6.0 M consensus);
Net Profit: € 268.1 M (€ -448.0 M in FY2018 vs. € 6.87 M BS(e));

The 4Q’19 results came in below expectations on the operating level and above in cash. EBITDA on the quarter came in below our estimates and those of the consensus (€ 88 M vs. € 110 M BS(e) and € 108 M consensus) despite higher sales figures (€ 1.76 Bn vs. € 1.5 Bn consensus) due to lower EBITDA margins (5% vs. 7% consensus). By divisions, Toll Roads (75% of our T.P.) grew below expectations (+12.2% in EBITDA vs. +24% consensus) due to lower returns than expected (64.2% vs. 68.3% consensus), whereas Construction (3% of our T.P.) met the company’s guidance for the 2H’19 (€ 0 M of EBIT). Net Profit came in at € 372 M (vs. € 111 M BS(e) due to better results by equity method (mainly Heathrow), pricing in Ausol’s and Broadspectrum’s sales (€+474 M and €-270 M, respectively).
On the positive side we highlight the company’s net cash position ex infra, which improved by € 969 M on the quarter to € 1.63 Bn (vs. €~1.16 Bn Bs(e) thanks to a remarkable performance in working capital, which generated € 562 M in 4Q’19, and lower provisions in Construction (€-143 M vs. € 345 M BS(e)).
Despite the good cash generation, we could see a negative market reception due the weaker operating performance in Toll Roads (75% of our T.P.) and the stock’s excellent performance in the last year (+40% vs. IBEX), which could lead to profit taking. We continue to see FER as an attractive stock with limited risks and additional upside through the development of new greenfield projects (it has the experience and resources to do so). Thus, we see room to extend the current limited upside of our T.P. and maintain our BUY recommendation. T.P. € 29.70/sh. (+10.53% upside).