Morgan Stanley | After it being the principal motive for criticism from investors, the recent recovery in traffic on the 407-ETR (-19% vs 2019 en Q2’22; -34% vs 2019 in Q1’22) is driving Ferrovial’s momentum in the short-term. And it also provides support for a return to dividend payments mid-July 2022.
In Heathrow, increased traffic, more inflation-linked in the short-term and lower CAPEX more than offset cost expectations. Meanwhile, in the rail tracks under management in the US, the macro environment continues to provide support, although there is less visibility.
We consider Ferrovial to be a stock with exposure to the US, sensitivity to inflation and protection against the upticks in IRRs. For that reason, we believe the expectations put in the price by the market with regard to the recovery in traffic in the short-time are low (407-ETR, Heathrow). Whatsmore, it also has various catalysts in the short/medium term (opening of the I-66 motorway in the US, regulatory decision over H7…). We expect Ferrovial to offer increasingly more attractive stability, between the distribution to shareholders (in the short-term backed by sales and in the medium-term by the hike in dividends) and reinvestments (New Terminal One in the US).
Ferrovial, Overweight, Target Price 34 euros/share.
