KEY POINTS
- Worley shares fell nearly 10% on 25 June after the company lifted its expected FY26 earnings hit from the Middle East conflict to up to A$60 million, well above the A$30 to A$40 million it flagged in April.
- A stronger Australian dollar adds a further A$50 million hit to FY26 earnings, making this a double blow rather than a single bad headline.
- The better news: no projects have been cancelled, margins are holding, and most of Worley’s cost savings are already in place.
- Our view: the story looks delayed, not broken. Holders can sit tight, but new buyers may want to wait for the August results.
Worley (ASX:WOR) crashed almost 10% on Thursday to A$11.08, making it one of the worst-performing large caps on the ASX 200 for the day. The fall came after the engineering group warned that the ongoing Middle East conflict would hurt its FY26 earnings far more than it had first thought, with a stronger Australian dollar adding to the pain. With the shares sliding back towards the lower end of their 52-week range, the real question for investors is simple: Is this a buying opportunity or a warning to stay away?
What made Worley shares crash today?
Back in April, Worley said the Middle East conflict would cut about A$30 to A$40 million from its FY26 underlying EBITA, a key measure of profit. On Thursday, it raised that figure to up to A$60 million. Customers are still delaying the start and award of new projects, and existing work is taking longer to complete.
There is a second problem, and it is a new one. A stronger Australian dollar in the second half of the year is expected to knock a further A$50 million off FY26 earnings. This matters because Worley earns a large share of its money overseas, so a higher Aussie dollar shrinks those earnings once they are converted back home. Put simply, the company is being squeezed from two sides at once.
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Is the long-term story actually broken?
Here is the part the headlines skip. Despite the bigger hit, no Middle East projects have been cancelled. Worley’s standing margin target of 9.0% to 9.5% still points to steady pricing power, and at its May Investor Day, the company said it had already actioned about A$95 million in annual cost savings, with more underway, while targeting double-digit EBITA growth out to FY30.
In our view, this looks like a delay, not a collapse. FY26 is shaping up as a pause year while the conflict and a higher dollar work through the numbers. The catch is that shareholders now have to wait longer for the recovery to show up.
So, is Worley a buy now?
At A$11.08, Worley looks cheap on paper. It trades below the average broker price target of around A$14 and on a P/E of about 16.9. But here is the catch: brokers were already cutting their targets before today, with Morgans down to A$11.60 and RBC to A$13. This larger downgrade will likely bring more cuts. In short, cheap can stay cheap while the bad news keeps coming.
So what should you do? If you already own Worley, the dividend (a yield of about 3.2%) and the large project backlog are good reasons to hold rather than sell into the fall. If you are thinking about buying, the smarter move is probably to wait for the August full-year results, which should show whether the Middle East and currency hits are under control.
Two things will decide where the stock goes next: how long the conflict lasts, and whether the Australian dollar keeps rising.
The bottom line: Worley’s story is not broken, just delayed. At today’s price, the risk and reward look balanced rather than compelling, so patience is likely the wisest play.
