John Wood Group PLC has been in the energy industry since it was founded in Scotland in 1982. However, like many firms tied to the energy market, Wood Group has faced some ups and downs over the past several years.
Read to gain insight into the stock’s fluctuations and learn about the external factors and business conditions impacting performance that might also affect the WG share price in 2024.
John Wood Group PLC has over 35,000 people employed and operates in more than 50 countries.
Over the decades, the company has undergone many changes, including mergers, spinoffs, and acquisitions. Today, it focuses on engineering and consulting services in assets, consulting, and operations.
Wood Group works with some of the most prominent players in oil and gas, including Shell, BP, Total, Chevron, and ExxonMobil. The company has also sought to diversify into cleaner energy such as hydrogen, biofuels, wind, solar, and carbon capture.
This mix of traditional and renewable energy aligns with Wood Group’s guiding purpose: “Unlock Solutions to the World’s Most Critical Challenges,” which has become their business foundation.
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After seeing a slight increase from 2018 to 2019, Wood Group’s sales took a major hit in 2020 with the onset of the COVID-19 pandemic.
Revenues fell nearly 24% from 2019 to 2020, dropping from £7.75 billion to £5.9 billion. The following year saw a revenue decline of almost 36% to £3.81 billion in 2021.
Nonetheless, 2022 brought some recovery, with sales rising to £4.42 billion, though still far below pre-pandemic levels.
This short analysis aids investors in making informed decisions about stock investments, as consistent revenue growth often indicates a stable and promising investment.
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The WG share price saw positive momentum in the first quarter of 2023. The stock steadily climbed from around 160p in January to hit its peak of 227.90p by March.
The rapid 60% surge indicates investors were bullish on Wood Group’s outlook at the start of the year. However, this peak was followed almost immediately by a plunge over the next two months.
By May 2023, the WG share price cratered nearly 50% off its high to reach 129.80p. This intense sell-off reveals a drastic shift in sentiment among traders.
What could have driven such an extreme reversal?
The most likely culprit was Wood Group’s 2022 earnings report. Based on MarketWatch data, the company posted a net loss of £576 million for the year, reflecting continued weakened demand in its end markets.
Aside from the wild spike and crash in the first half of the year, the WG share price mainly traded in a wide range between approximately 125p and 175p for the remainder of 2023. This shows the stock found a temporary floor but faced resistance around 175p.
There was a slow recovery pattern from the August low of 146.80p back up to 173.50p by December. Yet, continued volatility shows persistent uncertainties around the company’s outlook.
Lower oil prices likely weighed during parts of the year. Weak industrial activity and cost overruns may have also caused fluctuations.
After the initial shocks, the WG share price oscillated within a 50p trading range during the second half of 2023 without establishing a definitive trend.
Investors remained cautious due to the headwinds facing the business.
While 2023 proved turbulent for the WG share price, the company did exhibit some resilience. The stock managed to claw back near its pre-plunge highs after substantial declines.
But with the stock still below its peak March 2023 level, it remains unclear whether Wood Group can maintain a sustainable recovery. It will most likely hinge on the health of the oil and gas industry.
If demand strengthens and projects restart, Wood Group’s services should see improvement. A healthy economy and an uptrend in industrial activity would also help.
Furthermore, competitive dynamics, contract wins, inflation, and financing costs also play roles. And the pivot towards clean energy brings uncertainties around profitability. Management’s execution in restructuring the business will be critical.
For investors, Wood Group will likely remain a volatile stock in the near term. Nonetheless, the company’s strong market position and diverse services provide some stability if energy markets normalize.
Those able to withstand fluctuations could benefit if Woodward makes the right moves to optimize operations and capital structure.
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John Wood Group PLC faced significant challenges over the past few years as its core oil and gas markets weakened.
It led to steep revenue declines and stock price volatility, with the WG share price crashing 50% in early 2023 after initially surging 60%.
Looking ahead, Wood Group’s ability to restructure operations, reduce costs, and diversify into cleaner energy will be vital in rebuilding profitability.
A recovery in industrial activity and oil prices would also boost performance.
Wood Group remains a higher-risk, volatile stock for investors until the business fundamentals improve. While the company has resilience, caution is warranted, given the uncertainties surrounding its turnaround efforts.
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