Narrowing EPC Markets And LNG Volatility Will Threaten Legacy Projects

Key Takeaways

• Accelerating global energy transition and reduced oil and gas investment threaten the company's core project revenues and long-term market opportunities.
  
• Dependence on large LNG projects and rising clean-tech competition increase earnings volatility and pressure on margins and long-term profitability.
  
• Strategic diversification in technology, geography, and decarbonization projects positions Technip Energies for sustained earnings growth, resilience, and leadership in global energy transition markets.

Catalysts

Operates as an engineering and technology company for the energy transition in Europe, Central Asia, the Asia Pacific, Africa, the Middle East, and the Americas.

• Rapid regulatory acceleration away from fossil fuels and stricter emissions targets across key regions threaten Technip Energies' existing legacy hydrocarbon project backlog and future order intake, risking a prolonged decline in core project delivery revenues and long-term backlog erosion.
  
• The structural reduction in capital expenditure by oil and gas majors as they redirect investments toward renewables and energy storage could sharply narrow the addressable market for large-scale EPC projects, leading to underutilized engineering capacity and a significant slowdown in revenue growth.
  
• Persistent reliance on a small cluster of mega-projects in LNG (notably in Qatar, the U.S., and select new geographies), combined with increased geopolitical uncertainty, exposes the company to major earnings volatility and the risk of abrupt earnings deterioration if any major project is delayed or cancelled.
  
• Technological disruptions, such as a shift toward decentralized, modular energy solutions and faster-than-anticipated advancement of emerging clean technologies, may outpace Technip Energies' current technology portfolio and necessitate costly R&D and capability upgrades, resulting in ongoing margin compression and reduced profitability.
  
• Intensifying competition from both traditional EPC providers and agile, specialized clean-tech firms, especially in carbon capture, hydrogen, and sustainable fuels, is likely to erode Technip Energies' market share and pricing power, fostering an environment where net margins and long-term earnings growth steadily deteriorate.

Technip Energies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Technip Energies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Technip Energies's revenue will grow by 6.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 5.4% today to 6.2% in 3 years time.
• The bearish analysts expect earnings to reach €536.6 million (and earnings per share of €3.01) by about August 2028, up from €393.6 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 bearish analyst cohort, the company would need to trade at a PE ratio of 12.3x on those 2028 earnings, down from 18.3x today. This future PE is greater than the current PE for the FR Energy Services industry at 10.4x.
• Analysts expect the number of shares outstanding to decline by 2.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.9%, as per the Simply Wall St company report.

Technip Energies Future Earnings Per Share Growth

Risks

• Technip Energies is experiencing strong growth in revenue and EBITDA, with first half 2025 revenues up 15% and EBITDA up 13%, underpinned by a robust €18 billion backlog representing 2.6 times their 2024 revenue, which provides excellent long-term earnings visibility and could support sustained or growing profitability.
  
• The company is successfully diversifying its order intake, with nearly 40% now coming from decarbonization-related projects such as blue molecules and carbon capture, positioning it to benefit from global energy transition trends and potentially accelerating both revenue and margin opportunities in future years.
  
• Technip Energies is advancing and commercializing proprietary technologies in high-growth, low-carbon markets, including exclusive global alliances (e.g., with Shell for carbon capture), commercial-scale deployments of low-emission ethylene cracking furnaces, and investments in catalysts, which can boost high-margin technology licensing income, enhance competitiveness, and improve net margins over time.
  
• Geographic diversification has reduced reliance on the Middle East, with 70% of recent order intake originating from markets such as the Americas and UK, creating greater balance in the order book and potentially stabilizing revenue streams against regional volatility in core energy markets.
  
• High free cash flow generation, with cash conversion from EBITDA exceeding 100% and a growing net cash position above €1.6 billion, gives Technip Energies significant capital allocation flexibility for investment, dividends, and resilience, all of which could support continued earnings strength and shareholder value creation in the long term.

Valuation

• The assumed bearish price target for Technip Energies is €33.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Technip Energies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €50.0, and the most bearish reporting a price target of just €33.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €8.7 billion, earnings will come to €536.6 million, and it would be trading on a PE ratio of 12.3x, assuming you use a discount rate of 6.9%.
• Given the current share price of €40.68, the bearish analyst price target of €33.0 is 23.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• 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.