Decarbonization And Electrification Will Expand Renewable Markets Despite Headwinds

Key Takeaways

• Acciona's asset rotations and efficiency gains are driving outsized earnings growth, stronger cash flow, and faster deleveraging than expected by the market.
  
• High-margin, long-duration contracts and expansion into climate adaptation solutions underpin structurally higher revenues and sustained profit outperformance versus sector expectations.
  
• Project delays, regulatory risks, and high geographic concentration may constrain Acciona's revenue growth, compress margins, and add volatility to future cash flow and earnings.

Catalysts

Engages in the energy, infrastructure, and other businesses in Spain and internationally.

• Analyst consensus expects Acciona's asset rotation program to simply optimize the portfolio and unlock incremental value, but the magnitude of EBITDA uplift and capital gains from these non-core asset disposals has been consistently underestimated, with 2024–2025 capital gains already far outpacing book values, suggesting a continued multi-year outsized boost to earnings, cash generation, and deleveraging.
  
• While analysts broadly acknowledge infrastructure backlog as a foundation for future growth, they miss the step-change in long-term earnings visibility and margin expansion: Acciona's €58 billion+ backlog, weighted towards concession/PPP contracts with 50+ year durations and inflation-linked terms, underpins not just stable cash flows but decades of above-sector-average net margins as projects mature.
  
• Acciona's ability to scale up investments across emerging decarbonization solutions-specifically, utility-scale battery storage, green hydrogen, and integrated water infrastructure-positions it to capture a disproportionate share of global climate adaptation capex, opening new double-digit margin business lines and driving group-level EBITDA growth well above current market forecasts.
  
• The accelerating global electrification of industry and transport, combined with surging demand for reliable green power in data centers and manufacturing, directly expands the addressable market for Acciona's renewable and grid solutions, supporting structurally higher long-term revenue growth rates than modeled by the market.
  
• Acciona's digitalization and operational efficiency programs are already reducing work-in-progress capital intensity and working capital outflows, setting the stage for structurally higher free cash flow conversion and ROIC, which is likely to drive a meaningful re-rating of the shares as these improvements become visible in the numbers.

Acciona Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Acciona compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Acciona's revenue will grow by 1.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 3.8% today to 2.0% in 3 years time.
• The bullish analysts expect earnings to reach €458.5 million (and earnings per share of €8.07) by about August 2028, down from €832.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 30.1x on those 2028 earnings, up from 11.1x today. This future PE is greater than the current PE for the GB Electric Utilities industry at 15.0x.
• Analysts expect the number of shares outstanding to grow by 0.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.21%, as per the Simply Wall St company report.

Acciona Future Earnings Per Share Growth

Risks

• The company's ability to maintain its current growth trajectory may be constrained by a marked reduction in annual capacity additions, with new installations forecasted at just 600 megawatts per year through 2025 and 2026, down from previous years' levels close to 2 gigawatts; this moderation, coupled with paused projects in the U.S., may dampen long-term revenue growth and curtail earnings momentum.
  
• Ongoing and potentially rising interest rates across global markets, as well as increased volatility and uncertainty in the cost and availability of project financing (especially apparent in the U.S. due to new tariffs and regulatory change), risk raising Acciona's cost of capital, thereby pressuring future investment returns and constraining free cash flow.
  
• Acciona remains reliant on government support and favorable regulatory schemes, particularly in Spain, for stable revenue-exposure to changes in incentive structures and regulatory pushback in developed markets could trigger earnings volatility and lower net margins if subsidies or support mechanisms are scaled back or eliminated.
  
• The company's heavily weighted presence in Spain and to a lesser extent, other OECD countries, heightens geographic concentration risk; should the Spanish energy market experience stagnation, contract, or adverse regulatory shifts, long-term revenue growth and overall earnings diversification could be impaired.
  
• Delayed project ramp-ups and operational headwinds-such as slower-than-planned production from newly commissioned assets (e.g., MacIntyre, Forty Mile, Juna in India) due to technical incidents, grid compliance, or adverse weather-add uncertainty to revenue forecasts and place pressure on EBITDA and net profit, especially as asset rotation proceeds cannot fully substitute for lost or delayed operating income.

Valuation

• The assumed bullish price target for Acciona is €202.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Acciona's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €202.0, and the most bearish reporting a price target of just €95.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €22.7 billion, earnings will come to €458.5 million, and it would be trading on a PE ratio of 30.1x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of €170.2, the bullish analyst price target of €202.0 is 15.7% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.