On Tuesday, BofA Securities issued an update on Ferrovial SA (FER:SM) (OTC: FRRVF), raising the stock's rating from Neutral to Buy and increasing the price target to €44.00, up from the previous €37.50. The upgrade reflects a positive outlook for the company's operations, particularly in the United States.
The analyst from BofA Securities highlighted the strong operating outlook for Ferrovial's managed lanes in the U.S., which represent 45% of the firm's Sum-of-the-Parts (SOTP) valuation. The forecast for these assets includes greater than 15% EBITDA growth by 2025, propelled by increasing volumes, pricing above the Consumer Price Index (CPI), and the ramp-up of projects such as the I-66.
Despite Ferrovial's recent miss on the SR-400 tender, the company is recognized as a leader in the U.S. managed lanes sector. The firm is considered well-positioned to secure additional greenfield projects, with six upcoming opportunities in states like Georgia, Virginia, North Carolina, and Tennessee between 2025 and 2026.
The current valuation of Ferrovial's five operational managed lanes is estimated to be between four to sixteen times the invested equity. This valuation serves as the basis for the stock's fair value assessment.
The analyst also noted that new projects could significantly enhance the medium-term upside for Ferrovial's stock. This potential for growth is factored into the revised price target and upgraded rating.
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