Last Update 16 Dec 25

Fair value Increased 26%

FTI: Subsea Margin Ambitions Will Struggle To Justify Elevated Share Price

We are raising our fair value estimate for TechnipFMC from $30.00 to approximately $37.73 per share, reflecting analysts' higher price targets and greater confidence in the company's ability to convert robust EBITDA into free cash flow and expand subsea margins above prior expectations.

Analyst Commentary

Recent Street research has turned increasingly constructive on TechnipFMC, with multiple firms lifting price targets into the high 40s and low 50s and reiterating positive ratings. Updated models generally reflect strong third quarter execution, rising confidence in free cash flow conversion, and management's higher medium term subsea margin framework.

Analysts now see TechnipFMC converting roughly 70 percent of just over 1.8 billion dollars in EBITDA into free cash flow, reinforcing the view that the company is transitioning from a backlog growth story to a more cash generative profile. This shift, combined with enhanced shareholder return plans, is a key driver behind the higher fair value estimates and price targets.

Upbeat commentary also highlights 2026 subsea margin guidance of 20.5 percent to 22 percent, with the midpoint sitting above current consensus expectations. The improved outlook has been accompanied by share price outperformance versus sector benchmarks, reflecting growing confidence in TechnipFMC's ability to capture a larger share of the economics from its customers' offshore developments.

At the same time, JPMorgan and other major firms emphasize that the favorable subsea demand backdrop must still translate into consistent execution, including the goal of achieving 30 billion dollars in subsea inbound orders over a three year period. While the order pipeline and margin guidance are supportive of a higher valuation, the stock's recent rerating leaves less room for missteps on delivery and capital allocation.

Bearish Takeaways

Bearish analysts caution that the rapid share price appreciation and successive price target increases may have pulled forward a substantial portion of the upside, leaving limited valuation cushion if subsea order intake or margin expansion undershoots targets.
Some see execution risk around sustaining 20 percent plus subsea margins across a multi year cycle, noting that cost inflation, competitive pressure, or project delays could cap upside to current earnings and cash flow expectations.
There is concern that the ambitious 30 billion dollar subsea inbound order goal and elevated free cash flow conversion assumptions could prove optimistic if offshore spending normalizes or macro conditions deteriorate, which could pressure growth and returns.
Bearish analysts also highlight the potential for volatility in shareholder return plans, warning that higher capital return expectations embedded in valuation could be challenged by working capital swings or a weaker than expected cycle.

What's in the News

Awarded a substantial iEPCI contract by Eni for the deepwater Maha project offshore Indonesia, marking Eni's first use of TechnipFMC's Subsea 2.0 configure to order technology in the country, with systems tying back to the Jangkrik FPSO (Key Developments).
Secured a substantial contract from ExxonMobil Guyana to supply Subsea 2.0 based production systems for the Hammerhead development in the Stabroek Block, covering project management, engineering, and manufacturing for production and water injection (Key Developments).
Received a significant subsea production systems contract from Petrobras spanning greenfield projects, brownfield expansions, and asset revitalizations, with equipment to be manufactured and serviced locally in Brazil (Key Developments).
Awarded significant contracts from Chevron for Gorgon Stage 3 and from Ithaca Energy for the Captain field, expanding deployment of Subsea 2.0 trees, flexible risers, and flowlines in Australia and the U.K. North Sea (Key Developments).
Increased its equity buyback authorization by 2 billion dollars to 3.8 billion dollars and completed repurchases totaling about 14 percent of shares outstanding under the program announced in 2022 (Key Developments).

Valuation Changes

Fair Value: raised significantly from $30.00 to approximately $37.73 per share, implying a higher intrinsic valuation.
Discount Rate: edged down slightly from 7.16 percent to about 7.14 percent, modestly lowering the hurdle rate applied to future cash flows.
Revenue Growth: reduced moderately from roughly 4.24 percent to about 3.69 percent, reflecting a more conservative top line outlook.
Net Profit Margin: increased meaningfully from about 8.90 percent to roughly 10.67 percent, indicating higher expected profitability on projected revenues.
Future P/E: decreased slightly from around 15.45 times to about 14.29 times, suggesting a modestly lower earnings multiple embedded in the updated valuation framework.

Volatile commodity prices and tariffs could significantly compress margins, affecting profitability and constraining future earnings growth.
Delays in geopolitical or economic areas may impact revenue and profitability from long-term projects.
High-quality inbound orders and strategic alliances position TechnipFMC for growth, with a substantial backlog ensuring earnings predictability and stability amidst minor financial impacts.

Catalysts

About TechnipFMC

Engages in the energy projects, technologies, systems, and services businesses in Europe, Central Asia, North America, Latin America, the Asia Pacific, Africa, the Middle East, and internationally.What are the underlying business or industry changes driving this perspective?

The potential for a shift of capital budgets from onshore to offshore might be overly optimistic, especially with commodity prices introducing volatility. If this transition doesn't materialize as expected, it could negatively impact subsea project revenue growth.
The company's focus on long-term projects in regions like Mozambique and Cyprus might face delays or reduced activity due to unforeseen geopolitical or economic events, impacting revenue and profitability from these initiatives.
Despite the significant subsea backlog, any miscalculation in timing or execution could lead to project deferrals, impeding revenue recognition and affecting overall earnings predictability.
Over-reliance on direct awards, while beneficial, could expose TechnipFMC to risks if client confidence wanes, possibly due to broader industry challenges, affecting future order intake and revenue visibility.
Continued discussions around commodity prices and tariffs suggest a volatile environment that, if sustained or worsened, could compress margins significantly, thereby impacting profitability and constraining future earnings growth.

TechnipFMC Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on TechnipFMC compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming TechnipFMC's revenue will grow by 4.2% annually over the next 3 years.
The bearish analysts assume that profit margins will shrink from 9.2% today to 8.9% in 3 years time.
The bearish analysts expect earnings to reach $936.4 million (and earnings per share of $2.41) by about July 2028, up from $854.5 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 15.5x on those 2028 earnings, down from 16.5x today. This future PE is greater than the current PE for the GB Energy Services industry at 11.3x.
Analysts expect the number of shares outstanding to decline by 2.13% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.16%, as per the Simply Wall St company report.

TechnipFMC Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

TechnipFMC has demonstrated strong financial performance, with revenue reaching $2.2 billion and adjusted EBITDA increasing by 38% compared to the prior year, which could bolster earnings.
The company has a substantial backlog totaling nearly $16 billion, providing a stable revenue stream that extends through the end of the decade, offering earnings predictability.
The company's high-quality inbound orders have exceeded revenue in 8 of the last 9 quarters, supported by strategic projects from major clients like Equinor and Shell, which may drive revenue growth.
TechnipFMC's strategic alliances, such as with Cairn Oil & Gas, enhance its prospects for growth in new markets, potentially impacting future revenue and net margins positively.
The company's limited exposure to regions impacted by volatile commodity prices and recently announced tariffs, with only minor anticipated financial impacts, ensures stability in adjusted EBITDA.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for TechnipFMC is $30.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of TechnipFMC'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 $45.0, and the most bearish reporting a price target of just $30.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $10.5 billion, earnings will come to $936.4 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 7.2%.
Given the current share price of $33.59, the bearish analyst price target of $30.0 is 12.0% 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.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Commodity Volatility Will Test Subsea Efforts But Backlog Will Stabilize