Robust International Order Intake Will Reshape Urban And Green Infrastructure

Key Takeaways

• Robust construction backlog and green initiatives position the company to capture higher-margin contracts and benefit from sustained infrastructure demand and regulatory trends.
  
• Improved margins across business units, along with strong cash generation and disciplined financial management, support ongoing growth investment and mitigate market volatility.
  
• Intense competition, market slowdowns, and rising financial constraints threaten Bouygues' revenue and margin growth across telecom, construction, and energy segments.

Catalysts

Operates in the construction, energy, telecom, media, and transport infrastructure sectors in France and internationally.

• Bouygues' €33 billion construction backlog, buoyed by strong international order intake (notably outside France for Colas in EMEA, Asia-Pacific, and North America), provides solid multi-year revenue visibility, positioning the company to benefit from ongoing infrastructure demand in urbanizing markets and government green investment-supporting future revenue and EBITDA growth.
  
• Strategic progress in decarbonization and sustainability (e.g., rollout of low-carbon cement technology at Bouygues Construction, renewable energy PPAs at Bouygues Telecom, and biodiversity initiatives at Colas) aligns the group with increasing regulatory and client requirements for green construction and infrastructure, enhancing the probability of higher-margin, higher-value contracts and improving long-term group net margins.
  
• Equans' operating margin is outperforming targets (revised up to 4.2% for 2025 vs. original 4%, with a 5% target by 2027), supported by the rationalization of dilutive businesses and capacity to pursue M&A in profitable countries; these operational shifts-combined with growth in segments like data centers and energy transition projects-are expected to expand group margins and cash flow conversion in coming years.
  
• Bouygues Telecom's growing fiber (FTTH) and convergent network customer base (with 84% of fixed-line customers on fiber), ongoing customer acquisition, and integration of La Poste Telecom are set to boost recurring revenues and stabilize long-term cash flows-even as the current market is competitive-providing a structural offset to cyclical earnings volatility from other segments.
  
• The group's strong liquidity position (€13.4 billion), improving working capital discipline (with sharp increases in free cash flow before WCR vs. prior years), and a reduction in net debt year-on-year-even as acquisitions continue-enhance financial flexibility for further growth investments, margin improvement, and potential shareholder returns, ultimately supporting both earnings growth and valuation re-rating.

Bouygues Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bouygues's revenue will grow by 1.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.8% today to 2.3% in 3 years time.
• Analysts expect earnings to reach €1.4 billion (and earnings per share of €3.61) by about September 2028, up from €1.0 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €1.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.2x on those 2028 earnings, up from 13.0x today. This future PE is greater than the current PE for the GB Construction industry at 13.0x.
• Analysts expect the number of shares outstanding to grow by 1.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.67%, as per the Simply Wall St company report.

Bouygues Future Earnings Per Share Growth

Risks

• The telecom market remains highly competitive, especially in France, with recent aggressive pricing (notably from SFR) affecting both fixed and mobile segments, which has already resulted in pressure on Average Revenue Per User (ARPU) and is likely to constrain future revenue and margin growth.
  
• Equans, a key contributor to group results, is facing temporary slowdowns in data centers and gigafactories due to technological shifts and slower-than-expected growth in underlying markets like electric vehicles, which could limit order intake and revenue growth if these sectors do not rebound as anticipated.
  
• The construction and Colas segments face cyclical and macro risks: seasonality, election-driven public spending slowdowns (especially in France), and region-specific headwinds (e.g., North American weather disruptions), exposing near-term revenues and creating volatility in margins.
  
• Bouygues' working capital requirements remain sensitive to payment cycle normalization after two exceptional years, and modest improvements in net debt and gearing are partly offset by continued acquisitions and a substantial dividend payout, implying potential constraints on financial flexibility and net earnings if conditions deteriorate.
  
• The expected uplift in telecom ARPU from migration to fiber is plateauing, and future growth in this area will be limited by market saturation and cheaper, entry-level internet-only offers, putting pressure on recurring revenue and raising the risk of lower net margins in the medium term.

Valuation

• The analysts have a consensus price target of €41.3 for Bouygues based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €52.0, and the most bearish reporting a price target of just €35.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €59.1 billion, earnings will come to €1.4 billion, and it would be trading on a PE ratio of 16.2x, assuming you use a discount rate of 10.7%.
• Given the current share price of €35.64, the analyst price target of €41.3 is 13.7% higher.
• 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.