Worley's Middle East Earnings Hit Keeps Growing, Splitting Fund Managers on Value

A cheap multiple and a growing project backlog have some fund managers buying, while others see a seven-year earnings flatline still unresolved.

31 Aug 2026 · 5 min read

Worley has spent 2026 downgrading its own earnings twice over a conflict on the other side of the world, and fund managers are now split over whether that makes the engineering contractor cheap or simply a value trap dressed up in a low multiple. Middle East disruption has pushed the expected hit to FY26 earnings from an initial $30 to 40 million up to $60 million, with currency adding another $50 million headwind, even as the company keeps adding to its project backlog and its longer-term energy infrastructure pipeline.

A conflict that keeps costing more than expected

Pendal Group tracked the deterioration in real time. In April it estimated the Middle East conflict would cost Worley $30 million to $40 million in FY26 earnings, roughly a 4 percent headwind, given about 10 percent of the company's workforce sits in the region. By June that estimate had roughly doubled to as much as $60 million, with an additional $50 million currency translation hit, a revision Pendal said the market had not anticipated and punished harder than the underlying earnings downgrade implied. Spheria Asset Management described the stock falling 15 percent that month on its second weak trading update in under two months, noting a near-full retracement in oil prices did not help sentiment even though Worley's share price had barely benefited from oil's earlier strength, and warned that fixed overheads would be difficult to recover if the revenue shortfall persisted.

The bull case: rebuild, resilience and AI-driven margins

ClearBridge Investments argued Worley's rough 12 to 18 months, which included the cancellation of many energy-transition projects after US policy shifted, is giving way to a rebuilding pipeline centred on projects like CP2 LNG and broader energy infrastructure demand from data centres and other sources. ClearBridge expects countries coming out of the Iran conflict to invest more heavily in energy resilience and fuel storage, work it sees Worley well placed to win, on top of a cost reset that has moved much of the company's work into central hubs and an AI rollout across its engineering knowledge base that it believes will improve margins even if it does not move revenue much.

At current pricing, we think the company can reaccelerate growth from here.

— ClearBridge Investments, Article, June 2026

Spheria Asset Management reached a similar conclusion from a different angle, pointing to long-term growth from regional pipeline and export infrastructure investment, a global focus on national security and alternative energy sources, and potential near-term work supporting repair and rebuild efforts in the Middle East, calling Worley an attractive opportunity at under 10 times EBITA. Australian Eagle Asset Management increased its position despite the near-term headwinds, citing an aggressive buyback and an expanding backlog in sustainability and critical infrastructure work as evidence management remains confident in the business and its diversification away from traditional oil and gas projects. New contract wins through the year, including engineering and procurement work on a 450 megawatt gas-fired power project in June and a fabrication and construction contract for Pembina's Heartland Extraction Plant in Canada in August, gave that thesis some support.

The bear case: a seven-year flatline dressed up as cheap

Maple-Brown Abbott rated the stock a sell, arguing engineering contractors like Worley tend to look great during periods of strong contract flow, which usually means they are over-earning and an earnings hole is waiting around the corner, and that after yet another downgrade the stock still isn't cheap enough to clear its bar. Alphinity Investment Management agreed, arguing cheap alone is not a reason to buy without evidence of earnings upgrades, and that challenging green energy project economics mean expectations still need to be rebased before it would reconsider.

Antares Capital exited its position entirely in July, citing both a near-term concern, continued Gulf project disruption raising the risk of further delays, and a structural one, engineering, procurement and construction contractors increasingly integrating into front-end design work that has traditionally belonged to engineering houses like Worley, eroding the industry's old model. Pendal Group's deepest critique came in August, describing an in-line FY26 result undermined by soft FY27 guidance that saw consensus estimates cut to the bottom of the range. Pendal said the result laid bare a longer-running problem: since Worley's acquisition of Jacobs, revenue, profit and earnings per share have effectively flatlined, return on equity sits at just 6.4 percent against $5 billion of goodwill that has not earned its keep, and the earnings multiple has de-rated from around 15 times to 12 times. The Chemicals division was singled out as the main culprit, with revenue nearly halving from $4.5 billion in FY20 to $2.4 billion in FY26 and still bottoming, compounded by a key client scaling back due to Middle East supply issues.

The result laid bare a seven-year problem: since acquiring Jacobs, revenue, NPATA and EPS have effectively flatlined, and the multiple has derated from around 15x to 12x PE.

— Pendal Group, Newsletter, August 2026

Pendal was careful to note the stock's roughly 5 percent unfranked yield and a further $300 million buyback offer some downside protection, and that 12 times earnings looks cheap in isolation, but concluded that timing remains the real concern. That tension, cheap on the numbers, unproven on the trend, is what now separates the two camps. Bulls including ClearBridge, Spheria and Australian Eagle are betting that Middle East headwinds become FY27 tailwinds as Pendal itself expects, that new contract wins keep flowing, and that the FY30 double-digit EBITA growth ambition management laid out at its May investor day is achievable. Bears including Maple-Brown Abbott, Alphinity and Antares want to see the Chemicals division actually bottom and the earnings trajectory turn before treating the cheap multiple as anything more than a warning sign.