TechnipFMC Stock Has Room For More Growth

RDSA: Royal Dutch Shell logo
Royal Dutch Shell

The shares of TechnipFMC (NYSE: FTI) have gained 57% from the lows observed last year, supported by stable revenues and positive operating cash during the first nine months of FY2020. The company provides technology and services for the development of deepwater, conventional, and unconventional energy resources. As an EPC (engineering, procurement, and construction) player, Technip has strong project management capabilities across multiple energy domains. In view of a sizable order backlog of $19 billion and relatively flat long-term debt obligations during the pandemic, Trefis believes that the stock has room for more growth. Our interactive dashboard analysis highlights TechnipFMC’s stock performance during the current crisis with that during the 2008 recession.

Timeline of 2020 Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • From 3/24/2020: S&P 500 recovers 75% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

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In contrast, here’s how FTI and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 1/1/2010: Initial recovery to levels before accelerated decline (around 9/1/2008)

Technip Stock vs S&P 500 Performance Over 2007-08 Financial Crisis

Technip stock remained mostly level during the 2008 financial crisis at $34 in September 2007 to around $35 in March 2009 (as the markets bottomed out). In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.

The company delivered strong results during the pandemic

Technip’s Revenues grew by 46% from $9.2 billion in 2016 to $13.4 billion in 2019 due to multiple acquisitions and demand for energy services. However, the company’s margins deteriorated from impairment and restructuring expenses in the last two years. Despite a slow recovery in benchmark prices and energy demand as well as the global pandemic, Technip’s revenues remained relatively flat in 2020 supported by its subsea and construction businesses.


Phases of Covid-19 crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment

In view of a strong order backlog of $19 billion and relatively flat long-term debt obligations during the pandemic, Trefis believes that the stock has room for more growth.

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