HOCHTIEF's (ETR:HOT) 34% CAGR: A Tale of Two Growths

In the world of investing, it's not uncommon for a company's share price to outpace its earnings growth. However, when the gap is as significant as HOCHTIEF's (ETR:HOT) 34% CAGR in share price compared to its earnings growth over the same three-year period, it's worth taking a closer look. Let's dive into the factors that contributed to this discrepancy and explore what it means for investors.

1. Strong Order Backlog and New Orders: HOCHTIEF has consistently reported strong growth in new orders and a significant order backlog. In 2024, the company reported a record order backlog of EUR 66 billion, up 18% year on year, and new orders of EUR 32.1 billion, up 15% year on year (Source: HOCHTIEF Q3 2024 Earnings Call). This indicates a healthy pipeline of future revenue, which may have contributed to the share price growth.
2. Growth in Strategic Markets: HOCHTIEF has focused on expanding its presence in strategic growth markets, which accounted for around 50% of the Group's total new orders in 2024. These markets include advanced-tech projects, energy transition, and sustainable infrastructure, which are expected to drive future growth (Source: HOCHTIEF Q3 2024 Earnings Call).
3. Dividend Payouts: HOCHTIEF has a policy of paying out 65% of nominal net profit as dividends. Since 2012, the company has distributed EUR 2.7 billion in dividends to its shareholders, equivalent to EUR 37.40 per share (Source: HOCHTIEF Investor Presentation). Consistent dividend payouts can attract income-oriented investors and contribute to share price growth.
4. Share Buyback Programs: HOCHTIEF has also implemented share buyback programs, which can reduce the number of outstanding shares and increase earnings per share. This can make the company's shares more attractive to investors and contribute to share price growth.
5. Strong Balance Sheet and Credit Rating: HOCHTIEF has a robust net cash position and a solid investment-grade rating by S&P, which allows for bond financing on attractive terms. A strong balance sheet can instill confidence in investors and contribute to share price growth.
6. ESG Recognition: HOCHTIEF has consistently received positive results in leading ESG surveys and indices, including the Dow Jones Sustainability Index, MSCI, and Carbon Disclosure Project. Strong ESG performance can attract socially responsible investors and contribute to share price growth.

These factors, combined with the company's history of sustainable cash-backed operational profit growth and disciplined capital allocation, have likely contributed to HOCHTIEF's 34% CAGR in share price, despite earnings growth not keeping pace.

In conclusion, HOCHTIEF's (ETR:HOT) 34% CAGR in share price can be attributed to a combination of strong order backlog, growth in strategic markets, dividend payouts, share buyback programs, a strong balance sheet, and ESG recognition. While earnings growth may not have kept pace, these factors have contributed to the company's share price performance. As an investor, it's essential to consider these aspects when evaluating HOCHTIEF's prospects and making informed investment decisions.