Ferrovial stock falls amid penalty concerns

Investing.com -- Shares of Ferrovial (BME:FER) declined by 1.5% as the market responded to the company's forward-looking statements regarding expected penalties.

Ferrovial's recent confirmation that its 2025 earnings before interest and taxes (EBIT) are projected to be higher year-on-year (YoY) suggests a cap on the penalties related to S22, which have been a concern for investors.

The company's guidance indicates that the maximum expected penalties could be around C$239 million to maintain flat EBIT, given the assumptions of 15% revenue growth and approximately 5% growth in operating expenses and depreciation & amortization. This is below the consensus, which assumes a 6% EBIT growth for 2025, implying a penalty of about C$150 million. Analysts believe the range of estimates for the S22 penalties is much higher, and a cap at C$239 million would be a positive for market sentiment.

Despite the focus on future penalties, the fourth quarter results, which receded into the background, were reasonable with revenue meeting expectations. However, lower EBITDA was driven by higher operating expenses, aligning more with the company's expectations than the bullish consensus.

A notable negative surprise was the lower pricing, dropping to 10.9% from 13.6% in the third quarter, potentially due to increased promotional activity. This concern is compounded by expectations of heightened promotional efforts in 2025. While there was a traffic beat in the quarter, it was attributed to working day effects and favorable weather, which are considered lower-quality factors.

Jefferies commented on the outlook, stating: "we expect focus to be on outlook, which appears to put limits around the dilutive impact of any S22 penalty. Cons. does already assume +6.4% EBIT growth in 2025, but taking more bearish scenarios off the table should be a positive boost to sentiment."

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