Worley (ASX:WOR): When It Rains, It Pours … In Foreign Currency

Some days a company puts out one piece of bad news. Worley (ASX:WOR), the Sydney-headquartered engineering and project-services giant, decided that was for amateurs and lobbed two announcements onto the ASX on the same morning. The market responded the way you’d expect when someone hands you a lawsuit and a profit warning before your second coffee: it sold the stock down about 10%. Let’s unpack the carnage, because underneath the drama there may actually be something for the patient investor.

Bad news #1: the guidance downgrade

We’ve written before about Worley’s Middle East problem, and unfortunately the story keeps getting worse rather than better. Back in April, management told us the ongoing conflict in the region would shave $30–40 million off FY26 underlying EBITA (that’s earnings before interest, tax and amortisation, for those of us who don’t dream in acronyms). Today, that estimate was upgraded, and not in a good way. Worley now reckons the hit could be up to $60 million, roughly double the earlier number.

The culprit isn’t lost work, mercifully. There have been no project cancellations. Instead, customers in the region are dragging their feet on starting and awarding new projects while bombs and diplomacy compete for attention. A memorandum of understanding has reportedly been signed and there’s talk of reopening the Strait of Hormuz, but as Worley politely puts it, “uncertainty continues.” In plain English: nobody’s signing big contracts while the neighbourhood is still on fire.

And then, because the universe enjoys a good kicking, there’s the Australian dollar. The Aussie has strengthened in the second half of FY26, which is lovely if you’re holidaying in Bali, but rather less lovely if you earn a chunk of your profits in US dollars and have to convert them back home. That foreign-currency translation effect is tipped to knock a further $50 million off reported underlying EBITA. To be clear, this one is an accounting translation rather than a hole in the actual business, i.e. the money was earned, it just shrinks on the trip home. But the market doesn’t always pause to read footnotes when it’s busy hitting the sell button.

Bad news #2: the class action that won’t die

Now to the lawsuit, which has more chapters than a Tolstoy novel and almost as many casualties.

Rewind to 2013. Worley, then trading as WorleyParsons, told the market in August that it expected improved earnings across all sectors in FY14, building on a FY13 profit of $322 million. It cheerfully repeated that guidance in October. Then, on 20 November 2013, it downgraded the forecast and the share price promptly fell around 25%. Shareholders who’d bought in during that sunny three-month window were, to put it mildly, unimpressed.

Cue Shine Lawyers and a class action alleging Worley didn’t have reasonable grounds for those rosy forecasts and breached its continuous disclosure obligations. What followed was a legal rollercoaster: the case was dismissed at trial in 2020, revived by the Full Federal Court on appeal in 2022, sent back to a single judge, and in late 2023 partially lost again: the court agreed Worley had engaged in misleading conduct, but found shareholders hadn’t proven the loss was caused by it. Causation, it turns out, is the bouncer that keeps most Australian securities class actions out of the club.

Then came 29 May 2026, when the Full Court reversed that, lowering the bar for proving causation and loss. Suddenly Worley is staring down what could become Australia’s first successful shareholder class action, a precedent that has corporate Australia’s general counsels reaching for the antacids. Today, Worley fired its last legal arrow: an application to the High Court for special leave to appeal.

The one silver lining? Worley’s legal defence has been funded by insurers, bar an initial deductible paid years ago. So, while the headlines are ugly, the company isn’t bleeding cash to pay the lawyers. That’s a meaningful distinction the share price reaction may be glossing over.

So why is the stock down 10%?

Here’s the thing, neither announcement is, on its own, a balance-sheet catastrophe. The EBITA hits are real but they’re largely about timing (delayed work) and translation (the strong Aussie), not collapsing demand. The legal costs are insured. So, why the double-digit drop?

In a word: credibility. Management sounded confident not so long ago, then doubled the damage estimate. Investors hate being told the same bad story twice, each time bigger. Stack a guidance downgrade on top of a legal cloud that just darkened considerably, sprinkle in an unhelpful currency move, and you get a sentiment cocktail that sends momentum traders running for the exits. The market is pricing in more uncertainty, not insolvency.

The bottom line: buy now or wait?

Let’s talk numbers. After today’s haircut, Worley trades on a forward P/E of roughly 13x, comfortably below the ~17x average for Australian construction and engineering peers. The dividend yield sits near 4.4%, the project backlog remains chunky, and management is still promising over $100 million in annual cost savings from FY27. Analyst price targets have been trimmed, but mostly sit above the current price, in the $12–14 region. On paper, that’s a stock the market has thrown out with the bathwater.

But, and it’s a meaningful but, Worley currently offers investors a lot of “ifs.” If the Middle East stabilises. If the Aussie dollar behaves. If the High Court takes the appeal. That’s three coin flips, and you don’t have to call all three correctly to make money here, but you’d want a decent stomach.

Our take: this isn’t a broken business, it’s a bruised one. For long-term investors who like buying quality when it’s unloved, today’s weakness is the sort of thing that rewards patience, perhaps in tranches rather than all at once. For everyone else, waiting for the August full-year results (and ideally a clue on the High Court) before committing fresh capital looks like the sensible play. The investment case here isn’t cancelled. It’s just been delayed, much like Worley’s Middle East projects.