Offshore Activity Generates Robust Project Pipeline for TechnipFMC

After incorporating 2022 results, we’re raising TechnipFMC’s FTI fair value estimate to $18 per share from $15 as the long-awaited resurgence of offshore activity starts to materialize around the world. We now forecast top-line growth will average about 8.5% per year through 2026, up from our prior estimate of 7% over the same period. We’re also more optimistic about the firm’s long-term profitability potential and expect firmwide operating margins will average about 8.5% per year through 2027, a roughly 150 basis point improvement over our prior forecast. We maintain our no-moat and stable moat trend ratings.

TechnipFMC consistently controls nearly half the global market for subsea equipment and generates over 80% of its annual revenue through offshore solutions. After years of underinvestment and widespread operational disruption, offshore production activity is at last picking up speed. Estimates from Rystad Energy indicate global investment in offshore production increased 17% in 2022, with annual capital expenditure approaching $200 billion by 2025 (about $50 billion higher than the last five years, on average). TechnipFMC maintains a robust project pipeline that continues to expand. Its subsea backlog surpassed $8 billion at year-end, which will generate revenue through 2024. Management anticipates an additional $25 billion of inbound orders over the next three years, securing strong and stable revenue streams through at least 2027.