Ferrovial's toll-booth model has multiple catalysts on the horizon

Thesis Statement

Ferrovial invests in, designs, operates and builds transport, including toll roads, airports, construction, profiting off of a toll-booth model, collecting revenue over multi-year decade concession periods. The market is not fully realizing the extent to which numerous future catalysts, namely the Terminal One at JFK and the 407 ETRs ability to surpass earnings expectations due to construction risk and earnings projection uncertainties.

Market Dislocation With numerous catalysts on the horizon, FER holds numerous stakes in distinct districts that will return high quality and continuous returns. Assets in 86% of FER's equity value sits in North America, while the primary liquidity and index weight are still European. Superficial accounting reporting or simple EV/EBITDA or P/E screens do not take into account the minority/JV stake that FER holds within the ETR, nor do they take into account the stake within JFK New Terminal One. At 87% complete at time of writing, JFK New Terminal One represents a real and strong catalyst that will start generating cash returns shortly after construction is finished. Additionally, the US managed lanes (NTE, LBJ, NTE 35W, I-66, I-77) have historically outpaced inflation while scaling pricing power with demand. With Highways revenue grew 13.7% like-for-like in Q1 2026, managed lanes represent consistent and underappreciated revenues that will support future reinvestment.

Valuation A sum-of-parts valuation implies a conservative case of €41.8B NAV, while a bull case provides €52.8B NAV. On the bull side, the company looks discounted to the current market capitalization of the company, sitting at around €44.84B. Traditional metrics or screens dismiss the stock as overvalued; they do not take into account equity stakes within various projects. FER maintains a trailing dividend yield of 2.32%, while executing share buybacks within the past two years, as shares outstanding have reduced by 0.76% and 0.56% for 2025 and 2024 respectively. EV/Sales sits at 5.33x, compared to a 5-year average of 5.00x.

Business Quality

At the end of 2025, Ferrovial held a net cash position of EUR 1.34 billion, compared to net debt of EUR 7.23 billion, operating with leverage of 5.4x, which can be considered conservative considering the nature of the company’s assets generating bond-like cash flows. The 5x leverage is due to recourse versus non-recourse debt, with the majority of FER’s debt beingnon-recourse project debt. FER maintains a wide-moat business model, with its largest moat being its 48.29% stake in the 407 ETR through Toronto. Furthermore for 407 ETR, a 72 year monopoly granted by government contract, revenues per trip rose 11.7% in 2025, notably outpacing inflation as the US managed lanes are. Toll roads run ~85-90% EBITDA margins with low cyclicality, with construction costs and maintenance being minimal and cyclical.

Sell Triggers Investors will have to monitor inflationary movements and ETR margins in addition to the JFK New Terminal One revenues to better understand how the company’s investments are faring. Two consecutive semesters of revenue deceleration for JFK (once built), or three semesters of ETR margin declines will trigger a sell. Fair value will be placed at $87.00, a combination of Morningstar fair value ratings and analyst consensus, representing an upside of 20%. Exit will be subject to trim 50% at fair value, full exit at 120% of fair value.