Ferrovial SE (FER) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates strong financial performance, particularly with a 36% dividend increase for 407 ETR and a growing order book in the Construction Division. The Q&A session highlighted potential revenue growth in U.S. Managed Lanes and construction projects, though some guidance was vague. The strategic focus on maximizing EBITDA and traffic growth suggests positive future prospects. Despite some uncertainties in project timelines and AI implications, the overall sentiment is optimistic, with increased shareholder returns and strategic project developments likely to positively impact the stock price.

Key Financial Performance

Revenue EUR 9.6 billion, up 8.6% year-over-year on a like-for-like basis, driven mainly by higher revenues in highways and construction.

Adjusted EBITDA EUR 1.5 billion, representing a 12.2% year-over-year increase on a like-for-like basis, supported by the growing contribution from U.S. Managed Lanes and a solid year in construction.

Construction Order Book EUR 17.4 billion, a new all-time high, with almost 50% coming from North America.

Dividends from Projects EUR 968 million, showing a 2.2% increase year-over-year, led by contributions from Managed Lanes and 407 ETR.

Cash Position (Net Debt Excluding Infra Projects) Negative $1.3 billion, supported by record dividends and proceeds from asset sales.

Total Shareholder Return 38.6% in 2025.

Highways Revenue Grew 13.7% like-for-like in 2025, driven by strong double-digit growth from U.S. assets.

407 ETR Revenue Grew 17.8% year-over-year, with toll revenue increasing 17.6%, primarily due to higher toll rates effective January 1, 2025.

407 ETR Traffic Increased by 6.1% in 2025, driven by targeted rush hour offers and Return To Office mandates, partially offset by unfavorable winter weather.

407 ETR Dividends CAD 1.5 billion distributed in 2025.

Dallas-Fort Worth Managed Lanes Revenue Revenue increased by 8.1% (NTE), 8.6% (LBJ), and 14.7% (NTE 35 West) year-over-year, despite construction impacts.

Dallas-Fort Worth Managed Lanes Dividends NTE: $216 million, LBJ: $123 million, NTE 35 West: $215 million.

I-66 Revenue Per Transaction Grew by 13.3% in 2025, supported by Return To Office policies and corridor growth.

I-66 Dividends $165 million distributed in 2025, compared to $172 million in 2024.

I-77 Revenue Per Transaction Grew by 24.7% year-over-year in 2025.

I-77 Dividends $52 million distributed in 2025, compared to $307 million in 2024, which included the first dividend after 5 years of operation.

Construction Revenue EUR 7.7 billion, up 7.5% like-for-like compared to 2024.

Construction Adjusted EBITDA EUR 511 million, up 19.9% year-over-year.

Construction Adjusted EBIT EUR 352 million, increasing by 24.2% like-for-like.

Operating Cash Flow EUR 597 million in 2025, compared to EUR 291 million in 2024, driven by working capital seasonality and prepayments in the U.S. and Canada.

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Operating Highlights

New Terminal One (NTO) at JFK Airport: Progressing towards operational readiness with 82% construction completed by end of 2025. Target completion for the first phase is fall 2026. Secured commitments from 25 airlines.

Solar Photovoltaic Projects in Texas: Development of solar energy projects initiated.

Data Centers in Spain and Poland: Acquisition of land plots for data center development.

North American Market: Joined NASDAQ-100 Index in December 2025, reflecting growing presence and investor confidence. Increased stake in 407 ETR to 48.29%.

India Market: IRB Private InvIT awarded 2 new TOT concessions, reinforcing leadership in toll road monetization.

Highways Division: Revenue grew 13.7% year-over-year, driven by strong performance in North America. Adjusted EBITDA increased by 12.2%.

Construction Division: Revenue reached EUR 7.7 billion, up 7.5% year-over-year. Adjusted EBITDA grew 19.9%. Record order book of EUR 17.4 billion, with 50% from North America.

Airports Division: Dalaman Airport in Turkey saw a 3.6% revenue increase despite a 1.1% decline in passenger numbers.

Capital Allocation Strategy: Focused on mature assets and reinvestment in high-value opportunities. Divested AGS and a 5% stake in Heathrow Airport.

U.S. Infrastructure Projects: Shortlisted for I-285 East Express Lanes in Georgia, I-24 Southeast Choice Lanes in Tennessee, and I-77 South Express Lanes in North Carolina.

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Risk or Challenges

Foreign Exchange and Bidding Costs Impact: The adjusted EBITDA for the fourth quarter declined by 2.9% compared to the previous year, impacted by foreign exchange fluctuations and higher bidding costs.

Construction Works Impact on Traffic: Traffic in the Dallas-Fort Worth Managed Lanes was impacted by ongoing construction works, leading to a decline in traffic and bottlenecks at managed lane access and exit points.

Weather and Traffic Mix Challenges: Adverse weather conditions and unusual traffic mix affected revenue per transaction and traffic performance in several assets, including I-66 and I-77.

Schedule Delays in JFK New Terminal One Project: The contractor communicated an updated target completion date for the first phase of construction to fall 2026, indicating potential delays in operational readiness.

Macroeconomic and Geopolitical Headwinds: Dalaman Airport in Turkey faced challenges due to macroeconomic headwinds and geopolitical issues, which significantly affected international traffic.

Revenue Share Impact on EBITDA: Revenue sharing agreements in Dallas-Fort Worth Managed Lanes impacted EBITDA growth despite solid revenue performance.

Capacity Constraints and Congestion: Bottlenecks and congestion issues in managed lanes, particularly in NTE 35 West, are expected to take years to resolve.

Exit from Waste Treatment Business: The company plans to exit the Isle of Wight waste treatment contract by March 2026, which may involve operational and financial adjustments.

Inflation and Design Activity Costs: Profitability in the construction division was impacted by significant design activity in bidding for projects and costs related to digitalization and IT systems.

Traffic Decline in I-77: Traffic in I-77 declined due to adverse weather conditions and the absence of exceptional uplift from hurricane-related alternative lane closures in the previous year.

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Guidance & Outlook

North American Infrastructure Assets: The company expects continued strong performance from its North American infrastructure assets, including the 407 ETR and U.S. Managed Lanes, with revenue and EBITDA growth projected to remain robust. The Greater Toronto area and Dallas-Fort Worth regions are expected to experience significant population and economic growth, supporting long-term asset value.

U.S. Infrastructure Projects Pipeline: Ferrovial is facing a record pipeline of infrastructure projects in the U.S., including managed lanes projects in fast-growing metro regions such as Georgia, Tennessee, and North Carolina. Awards for these projects are expected between 2026 and 2027.

New Terminal One at JFK Airport: The first phase of construction is targeted for completion by fall 2026, with operational readiness being a key focus. Commitments from 25 airlines have been secured, including 16 executed agreements and 9 letters of intent.

Dallas-Fort Worth Managed Lanes: Revenue and EBITDA growth are expected to continue, supported by favorable traffic mix and congestion relief measures. Construction works impacting traffic are expected to be completed by year-end 2026, except for two additional ramps.

I-66 and I-77 Managed Lanes: Future toll rates are expected to grow above inflation, driven by congestion evolution and user value. Adjusted EBITDA growth is projected to remain strong.

India Market Outlook: India remains an attractive market with strong GDP growth and significant infrastructure funding gaps. Ferrovial plans to continue leveraging its leadership in toll road monetization programs.

Construction Division: The division maintains a long-term target of a 3.5% adjusted EBIT margin, supported by a record-high order book of EUR 17.4 billion, with nearly 50% from North America. Future growth is expected to be driven by the U.S. and Canada markets.

Dividend Proposal: The company plans to propose EUR 1 billion in dividends for 2026, with an aggregate of EUR 2.2 billion for the 2024-2026 period.

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Shareholder Return Plan

Record Dividends from Infra Assets: Ferrovial received record dividends of EUR 968 million from its infrastructure assets in 2025, a 2.2% increase year-over-year. This was led by contributions from Managed Lanes and 407 ETR.

Dividends from North American Highways: Dividends from North American Highways totaled EUR 855 million in 2025, slightly below the EUR 860 million in 2024 due to an extraordinary dividend in 2024.

Dividends from 407 ETR: The 407 ETR distributed a total of CAD 1.5 billion in dividends in 2025.

Dividends from Dallas-Fort Worth Managed Lanes: NTE distributed $216 million, LBJ $123 million, and NTE 35 West $215 million in dividends in 2025.

Dividends from I-66: I-66 distributed $165 million in dividends in 2025, compared to $172 million in 2024.

Dividends from I-77: I-77 distributed $52 million in dividends in 2025, compared to $307 million in 2024, which included the first dividend after 5 years of operation.

Dividends from Airports: The Airports division distributed EUR 30 million in dividends in 2025, with Heathrow representing 50% of this amount.

Share Buyback Program: Ferrovial repurchased shares totaling EUR 501 million in 2025.

Cash Returned to Shareholders: Ferrovial returned EUR 156 million in cash to shareholders in 2025.

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Key Q&A

Q:Can you elaborate on the Q4 revenue per transaction being up 6% due to weakness in heavy vehicles and whether this will spill over into 2026?

A:The Q4 revenue per transaction was lower than the previous quarter due to seasonality and weather effects. There was some impact from heavy vehicles, but it is too early to determine if this will continue into 2026. Economic activity in Canada and promotions are expected to help maximize EBITDA in 2026, but no specific guidance was provided.

Q:What feedback have you received from customers regarding the new pricing for the ETR 407, and are you seeing demand erosion or negative mix impacts?

A:The company is positive about the promotions implemented, which have increased traffic but reduced revenue per transaction. These promotions are helping to maximize EBITDA. No specific feedback on demand erosion or negative mix impacts was provided.

Q:Can you elaborate on the volume weakness in Q4 for N35 West and whether this will spill over into 2026?

A:The volume weakness in Q4 was due to bottlenecks and congestion in the corridor. This is expected to continue in the short term, with softer traffic compared to overall traffic growth in the region. Solutions are being explored, but they require approvals and time.

Q:What are the reasons behind the provision for lifetime expected credit loss on the 407 ETR, and should this be expected again?

A:The provision was due to old accounts from a process change years ago. Current collections have returned to normal, and this is not expected to recur.

Q:Would Q4 margins suggest upside risk to the long-term EBIT margin outlook in construction?

A:The long-term average EBIT margin for construction is 3.5%. Q4 margins were higher due to one-offs and change orders, but the company maintains its long-term guidance.

Q:Can you provide anecdotal evidence on customer segmentation measures in the U.S. Managed Lanes?

A:Customer segmentation in U.S. Managed Lanes is being analyzed, but it is more difficult than in the 407 due to the lack of direct customer collections. Efforts are ongoing to explore value creation and maximize EBITDA through promotions.

Q:What are your thoughts on the impacts of AI and autonomous vehicles on Ferrovial's discretionary lane assets?

A:Autonomous vehicles are expected to increase traffic and congestion in the short term, especially when mixed with human-driven cars. The implications of AI are less clear, but the company will incorporate relevant information into its models and bidding processes.

Q:What is your stance on upstream dividends across the U.S. and Canada?

A:The 407 has comfortable ratios, allowing for potential dividend uplifts. Managed Lanes like I-66 may also see additional leverage in the near term, but no significant changes are expected immediately.

Q:Can you provide commentary on pricing for I-66 and I-77 at the start of the year and the strong Q4 performance in Ferrovial Construction?

A:No specific guidance was given for 2026 pricing. Toll rates for I-66 are expected to increase above inflation. The strong Q4 performance in construction was due to positive developments, change orders, and projects in later stages with reduced risks.

Q:What is the outlook for Schedule 22 payments in 2026?

A:Schedule 22 payments depend on traffic, revenue per transaction, and promotions. The focus is on maximizing EBITDA rather than achieving a specific payment number.

Q:Has there been any political or press pushback to the tariff increase for the 407 in 2026?

A:There has been no significant pushback to the tariff increase. Promotions are being used to provide value to users and maximize EBITDA.

Q:What is the status of the NTO project, and when will financial impacts be visible?

A:The NTO project opening is delayed to fall 2026. Financial impacts will be communicated after the opening and initial performance data are available.

Q:Are there plans to update the market on strategy or shareholder returns after the Horizon 26 plan ends?

A:The company is focused on delivering the Horizon 26 plan in its final year. A new plan will be prepared and communicated once finalized.

Q:What caused the weak Q4 performance for I-66 and the slowdown in LBJ?

A:I-66 was affected by a government shutdown and winter weather, impacting peak commuter traffic. LBJ experienced a slowdown due to construction works, which are expected to end by late 2026.

Q:Why was revenue per transaction high for I-77 despite lower traffic volumes?

A:Revenue per transaction was high due to increased value capture during peak hours. Charlotte's growth in jobs and economic activity also contributed.

Q:Is there any increase in the cost of the NTO project due to delays, and will it impact equity IRR?

A:The cost is close to budget, and no additional equity funding is expected. The delay has minimal impact on equity IRR.

Q:What is the dividend policy for the 407 ETR, and is it considered underlevered?

A:The 407 ETR's leverage reflects its strong financial performance, and there is potential for dividend increases. The asset is considered underlevered.

Q:Are there plans to switch to U.S. GAAP accounting as part of the U.S. listing strategy?

A:There are no immediate plans to switch to U.S. GAAP accounting, as there is no current market demand for it.

Q:Why were revenue sharing payments in Q4 for NTE and I-77 above average, and what is the outlook for 2026?

A:Q4 payments were higher due to budget outperformance and a catch-up in accruals. For 2026, I-77 is expected to move into a higher revenue-sharing bracket, causing a one-time increase.

Q:What is the purpose of the 407 loyalty plan, and how will it impact traffic and discounts?

A:The loyalty plan aims to increase traffic and provide value to users while maximizing EBITDA. Promotions will focus on peak hours, with additional segmentation and learning to refine offers.

Q:How will the end of construction on NTE in 2026 impact traffic and revenue?

A:Traffic is expected to return to the corridor, with less congestion and fewer mandatory modes. Revenue growth will depend on the balance of these factors.

Q:How does Ferrovial plan to manage its firepower given the large pipeline of U.S. projects?

A:The company is disciplined in financial decisions and does not expect to win all projects. Leverage headroom within the BBB rating allows for growth opportunities.

Q:Review of Unclear Management Responses

A:Management avoided providing direct answers or specific guidance on several topics, including: 1) Revenue per transaction growth for 2026, 2) Detailed feedback on customer response to ETR 407 pricing changes, 3) Financial impacts of the NTO project until after its opening, 4) Specific outcomes of the 407 loyalty plan, and 5) Detailed implications of AI on discretionary lane assets.

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Earnings Word Cloud

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FER Transcript

Ferrovial SE (FER) Q4 2025 Earnings Call Transcript

Positive2-28

Ferrovial SE (FER) Q3 2025 Earnings Call Transcript

Positive10-29

The earnings call summary highlights strong financial performance with record-high construction orders and plans for increased dividends. The Q&A session reveals optimism about future performance, despite some uncertainties in pricing and strategy. The company's strategic plans, such as highway bids and data center acquisitions, indicate growth potential. The shareholder return plan, including a significant buyback, further supports a positive outlook. However, some management responses lacked clarity, which tempers the sentiment slightly. Overall, the sentiment leans positive due to strong financials, strategic growth initiatives, and shareholder returns.

Ferrovial SE (FER) Q2 2025 Earnings Call Transcript

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The earnings call reveals strong financial performance with a 7.4% revenue growth and a 19.1% increase in adjusted EBITDA. The net cash position and comfortable order book add to the positive outlook. Despite some declines in specific areas, the company maintains optimistic guidance and a solid order pipeline. The Q&A highlights strong growth in average revenue per transaction and promising prospects in U.S. Managed Lanes. The focus on shareholder returns and strategic investments further supports a positive sentiment, likely leading to a stock price increase of 2% to 8% over the next two weeks.

Ferrovial SE (FER) Q1 2025 Earnings Call Transcript

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The earnings call summary presents a mixed outlook. Financial performance shows growth, with increased revenue and EBITDA, but competitive pressures and regulatory issues pose risks. The Q&A reveals management's reluctance to provide specific guidance, and analysts' concerns about traffic projections and governance details. Although shareholder returns are positive with dividends and buybacks, uncertainties in market demand and execution risks temper enthusiasm. The absence of a market cap and the presence of both positive and negative factors lead to a neutral prediction for stock price movement.

FER Report

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