Ferrovial SE (FER): A Bull Case Theory

We came across a bullish thesis on Ferrovial SE (FER) on Substack by OppCost. In this article, we will summarize the bulls’ thesis on FER. Ferrovial SE (FER)'s share was trading at $50.93 as of May 16^th. FER’s trailing and forward P/E were 10.24 and 43.86 respectively according to Yahoo Finance.

Ferrovial has strategically transformed into a focused operator of high-value transportation infrastructure assets in North America, supported by a growing Energy division, while divesting non-core businesses such as Services and a majority stake in Heathrow. This asset rotation has materially boosted reported net profits in 2024 through divestment gains, reflecting strong corporate financial health highlighted by a consistent net cash position (excluding non-recourse project debt) and an investment-grade credit rating.

Operationally, the company’s core Toll Roads segment, particularly the US Managed Lanes, delivers exceptional performance with revenue per transaction growing faster than inflation, while the Construction segment has rebounded to meet margin targets after prior difficulties. Key projects, including the on-schedule completion of JFK’s New Terminal One, underpin growth visibility alongside a robust construction order book and ongoing expansion of infrastructure assets and the Energy division. Although free cash flow has been volatile due to substantial growth investments, liquidity remains strong. The main challenge lies in executing large projects effectively to generate returns that compensate for capital deployment and replace earnings lost from divested assets.

Ferrovial’s intrinsic value is estimated at $49.85 per share based on a Discounted Cash Flow model, indicating the stock currently trades near fair value with a projected 5-year IRR of about 8.5%. Risks include project execution hurdles, construction cost overruns, reliance on continued asset rotation, and sensitivity to interest rate and regulatory changes. Overall, Ferrovial offers a stable outlook with moderate growth potential, contingent on successful delivery of its strategic transformation toward a North American infrastructure and energy-focused portfolio.

Ferrovial SE (FER) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held FER at the end of the fourth quarter which was 7 in the previous quarter. While we acknowledge the risk and potential of FER as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.