Insights

Why the lagging Worley (ASX:WOR) share price could be at COVID turning point

Everyone loves a good underdog story and the underperforming Worley Ltd (ASX: WOR) share price could prove to be a rewarding one to watch.
The post Why the lagging Worley (ASX:WOR) share price could be at COVID turning point appeared first on Motley Fool Australia. –

Man in white business shirt touches screen with happy smile symbol

Everyone loves a good underdog story and the underperforming Worley Ltd (ASX: WOR) share price could prove to be a rewarding one to watch.

Shares in the engineering contractor have slumped 38% since the start of 2020 when the S&P/ASX 200 Index (Index:^AXJO) shed around 11%.

Worley isn’t alone. Its peers have also been big laggards. The Downer EDI Limited (ASX: DOW) share price lost close to half its value while the Monadelphous Group Limited (ASX: MND) share price gave up a third of its market weight.

Downer and Worley share prices are post pandemic outperformers

But if history is any guide, at least two of these ASX stocks will outperform in the post COVID-19 world, according to Macquarie Group Ltd (ASX: MQG).

“The Contractors sector has underperformed ASX200 by 26ppt [percentage points] since the start of COVID 19 earlier in the year,” said the broker.

“Interestingly, DOW and WOR both significantly outperformed post containment of SARS back in 2003.”

Downer share price too heavily discounted

What could also help is how cheap the Downer share price is looking. The stock is trading on a FY21 price-earnings of 11.1 times, which is below the broader market and its own historical level.

Its reasonably bright outlook doesn’t support the big discount either. Around 70% of its customers are government departments and its transformation into a lower-risk services business is progressing well.

Multiple catalysts in FY21

Further, there are a few FY21 catalysts that could trigger a re-rating in the stock. The group is looking to sell its mining and laundry services businesses, and any progress on that front will be welcomed by the market.

Downer is also well placed to grow earnings this financial year. We might start to see evidence of higher earnings and stronger cash conversion at the next reporting season.

Macquarie rates the stock as “outperform” with a 12-month price target of $5.29 a share.

Top pick in the sector

However, the broker’s top pick for the sector is the Worley. The group posted a better than expected profit result last month but has little to show for the effort in terms of share price performance.

“WOR has acted quickly to manage costs and utilisation and has good leverage to expected medium term recovery in key end-markets,” said Macquarie.

“Our latest summation of global oil & gas capex budgets for 2020 shows -24% on pcp and +6% in 2021.

“Hence we are moving through the worst of capex cuts this year with modest improvement expected in CY21.”

The broker is recommending Worley as “outperform” with a price target of $13.46 a share.

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

Find out the names of our 3 Post COVID Stocks – For FREE!

*Returns as of 6/8/2020

More reading

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and WorleyParsons Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the lagging Worley (ASX:WOR) share price could be at COVID turning point appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!