Analyst Note| Katherine Olexa |
After taking a fresh look at TechnipFMC, we are lowering our fair value estimate to $14 from $24. We maintain our no-moat rating and stable moat trend. Two main factors drive the cut: a reduced midcycle operating margin stemming from the spin-off of Technip Energies and lower growth expectations owing to a reduced level of expected offshore activity compared with previous industry estimates. Technip Energies, spun off in the beginning of the year, was TechnipFMC’s most profitable segment since 2017, averaging 12% operating margins through 2020 while the firm’s remaining segment margins were negative. Without the benefit of Technip Energies, we’ve reduced our midcycle operating margin by about 100 basis points to 7%, compared with our previous estimate of 8%.