Arcadis shares jump 8% on €175 mln buyback program launch

Investing.com -- Arcadis N.V. (AS:ARDS) said on Wednesday it will launch a €175 million share buyback program, aiming to repurchase about 4 million shares, roughly 5% of its outstanding stock, a move that sent its shares up more than 8%. The program began October 1, and will run until July 1, 2026, at the latest.

The company said the buyback marks a shift in priorities, as it had previously placed greater emphasis on mergers and acquisitions. 

Kepler Cheuvreux analysts noted the step appears to be in response to concerns over Arcadis’ valuation multiples, stating, “With the program, Arcadis shows responsiveness to the market.” 

The company reaffirmed that bolt-on acquisitions will remain part of its strategy next year, while buybacks will also be considered, keeping leverage within a targeted net debt-to-EBITDA range of 1.5x–2.5x.

Arcadis operates in growth markets across key geographies, with significant infrastructure investment expected to support its revenue pipeline. The company projects strong organic growth as government budgets and private client demand increase. 

Kepler Cheuvreux added that profitability will take on greater importance in Arcadis’ new strategic cycle, noting the company’s target of a 12.5% operating EBITA margin by 2026. 

They cited measures including “project selectivity, synergies, the Middle East phasing out, focusing on key clients, and operational leverage” as critical drivers to narrow the margin gap versus peers.

Offshoring to Global Engineering Centres (GECs) is also part of Arcadis’ strategy to reduce costs, though analysts cautioned “will not be material during this strategic cycle.”

Key catalysts for the company’s outlook include announcements of new investment plans, updates to existing projects, add-on acquisitions, and accelerated organic growth from integrated projects. 

Kepler Cheuvreux applies a blended valuation methodology, combining discounted cash flow (DCF) and peer group multiple approaches.

 They said that “a discount to the average peer group multiples is not justified for Arcadis as the company belongs to the group of better performers in the industry.” 

For the DCF analysis, they use a weighted average cost of capital (WACC) of 8% and a long-term growth rate of 2%.

Risks cited include broader economic developments that could affect demand, as well as the cancellation or postponement of federal investment plans. The company also noted that execution of acquisitions could pose challenges to its strategy.