Worley Shares Sink on Middle East EBITA Hit
Worley (ASX:WOR) shares tumbled about 6% on Monday to close at around A$11.10 after the company told the market that the ongoing Middle East conflict will knock A$30 million to A$40 million off its FY26 underlying EBITA, a key measure of profit. Management now says earnings growth in FY26 looks “unlikely”, a big shift from the confident guidance it gave just eight weeks ago. With the stock already trading near multi-month lows, the real question for investors is whether this is a short-term geopolitical bump or a deeper warning about Worley’s turnaround plan.
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What Changed Since February and Why It Matters
Back in late February, Worley told investors it expected earnings to grow in FY26. Profit margins were on track, and the project backlog sat at a healthy A$16.7 billion. On Monday, that story changed.
The Middle East conflict is delaying new project awards and stretching out existing work. That is what creates the A$30 to A$40 million hit. But here’s the part investors should not miss: Worley has not lost any projects. Customers are still there. They are just taking longer to make decisions. Revenue is still expected to grow, and the margin target is still intact.
In other words, this is a timing issue, not a demand issue. Our view: the dollar hit is something Worley can handle. The bigger problem is credibility. Management sounded very confident just two months ago. That confidence now looks misplaced, and trust takes time to rebuild.
The Turnaround Was Already Under Pressure
Even before Monday, Worley’s numbers were already showing strain. First-half results in February revealed that higher transformation and restructuring costs were eating into profits, even though the underlying business was holding up. Brokers had started to cool. RBC cut its price target to A$13 (from A$18) and moved to a more neutral view. Jefferies moved the stock to Hold with a target of A$12.37, saying management’s upbeat tone did not match what the numbers were showing.
The good news? Worley’s long-term plan is still on track. The company still expects over A$100 million in yearly cost savings from FY27 onwards. The problem is that FY27 is the reward, not FY26. Monday’s news means shareholders have to wait longer for those benefits to show up.
The Investor’s Takeaway
At around A$11.10, Worley now trades below most broker price targets. The bull case needs three things to go right: the Middle East situation to settle, the backlog to convert into revenue on time, and those FY27 cost savings to actually show up. The bear case is simpler, with more restructuring costs and another miss on margins.
For current shareholders, the dividend and strong project backlog give you reasons to stay put. But do not expect a quick bounce. For new buyers, waiting for the August results to confirm the Middle East hit is contained looks like the smarter move. For momentum traders, nothing is exciting here right now. The stock needs proof, not promises.
In our view, Worley’s investment case is not broken. It has just been pushed back. At today’s prices, we believe the risk and reward look balanced rather than compelling.
