TechnipFMC’s Perspective in Q1: KEY Takeaways

FTI’s topline and EBITDA margin in the Subsea segment can improve in Q2 due to deepwater project growth in international markets. Its FCF is also slated to improve significantly in 2025. However, onshore challenges in the US onshore and the adverse effects of the tariff structure can depress short-term results.

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FY2025 Outlook

We have already discussed TechnipFMC's (FTI) Q1 2025 financial performance in our recent article . This article will dive deeper into the industry and its current outlook. The company’s management is cautious about the US onshore because of the region’s susceptibility to lower commodity prices and high cost of development. On the other hand, its Surface Technologies segment is critically dependent on the international markets, which have less cyclical, long-term investment horizons and lower cost of development.

It estimates that 95% of its revenue is generated from international operations and US offshore. Therefore, the company’s long-term outlook is bullish. Another key consideration is the recent tariff hike and its impact. Apparently, the effect will be confined to product-related revenue from the US onshore and the US Gulf. It estimates that a higher tariff can lower EBITDA by $20 million in FY2025, which would be insignificant.

iEPCI and Subsea 2.0 Projects

In Q1 2025, FTI had a Subsea inbound order of $2.8 billion. Company-wide, its total backlog was $15.8 billion, 10% higher than a quarter earlier. This was due to a growth in iEPCI (integrated Engineering, Procurement, Construction and Installation) and Subsea 2.0 orders. iEPCI orders grew nearly 25% year-over-year. We detailed some of the key projects in our short article.

In Q1, FTI’s key iEPCI and Subsea 2.0 projects included an award from Equinor for the subsea production systems and an iEPCI award from Shell for a development offshore Brazil. Taken together, iEPCI direct awards and Subsea Services constituted more than 80% of its inbound in 2024, and this trend continued in 2025.

Outlook And Forecast

In Q2 2025, FTI’s management expects Subsea segment revenues to increase by “low-double-digits” compared to Q1 2025. Its adjusted EBITDA margin is expected to expand by 400 basis points. In FY2025, FTI expects to generate an adjusted EBITDA of $1.76 billion. It also expects FY2025 FCF in a range of $1 billion to $1.15 billion.

Key Q1 Metrics

Quarter-over-quarter, revenues in the company's Subsea operating segment declined by 5.5% in Q1. The top line in the Surface Technologies segment decreased more steeply, by 7%.

FTI's cash flow from operations turned significantly positive in Q1 2025 from a negative cash flow a year ago. As a result, its FCF turned positive in Q1. During Q1, it repurchased shares worth $250 million. The company plans to distribute at least 70% of its FCF. It also plans to pay down EUR200 million on private placement notes that mature in June.

Relative Valuation

FTI is currently trading at an EV/adjusted EBITDA multiple of 8.8x. Based on sell-side analysts' EBITDA estimates, the forward EV/EBITDA multiple is 7.6x. The current multiple is equal to its five-year average EV/EBITDA multiple.

FTI's forward EV-to-EBITDA multiple contraction versus the adjusted current EV/EBITDA is much steeper than peers' because the company's EBITDA is expected to increase more sharply in the next four quarters. This typically results in a higher EV/EBITDA multiple than peers. The stock's EV/EBITDA multiple is higher than its peers' (SLB, BKR, and HAL) average. So, the stock is reasonably valued, with a positive bias, compared to its peers.

Final Commentary

FTI is cautiously bullish on its long-term prospects because the majority of its revenues are sourced from outside the US onshore, which carries risks from policy uncertainty and high development costs. Offshore projects, on the other hand, are on long-term cyclical development stages. It remains focused on the iEPCI and Subsea 2.0 projects that have won contracts in recent times.

So, in the short term, Subsea segment revenues and EBITDA margin can expand. It expects a step growth in FCF in 2025 and will distribute a majority of its FCF to shareholders and reduce international debt. The stock is reasonably valued, with a positive bias, compared to its peers.

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