Berenberg lowers target price on John Wood

Berenberg noted that Wood Group issued a "weak" Q3 update on 7 November, with the shares trading down roughly 60% since. Although 2024 underlying earnings guidance was maintained, Wood's reference to "significant" free cash flow from 2025 was dropped.

Most notably though, Berenberg noted that an independent review has been launched to determine whether any prior-year adjustments were required on contracts in Wood's projects business, creating significant uncertainty.

"Based on a sum-of-the-parts valuation, we estimate that the current share price effectively implies no value for the projects business. Given the recurring issues within this business, including historical write-downs, exceptional cash outflows and now the uncertain outcome of the review, we believe that this is not unreasonable until more clarity is provided," said Berenberg, which reiterated its 'hold' rating on the stock.

"We still think that the market requires evidence of actual FCF generation in 2025 before credit will be given for any turnaround in the underlying business."

Reporting by Iain Gilbert at Sharecast.com