Worley Ltd (ASX: WOR) shares are tumbling on Thursday after the engineering services group released a disappointing update.
At the time of writing, the Worley share price is down a sizeable 9.13% to $11.15. By comparison, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.38% to 8,775 points.
That leaves the ASX industrial stock down around 11% over the past month and 15% lower than this time last year.
The latest update clearly hasn't landed well with investors, with the company pointing to a larger-than-expected hit to FY26 earnings.
Let's take a closer look at what was announced.
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Worley warns on earnings
According to the release, Worley now expects the adverse impact on FY26 underlying EBITA to be up to $60 million.
Back in April, the company thought the impact would be closer to $30 million to $40 million.
Worley said the extended duration and ongoing impact of the Middle East conflict continue to disrupt the progress of existing projects.
No projects have been cancelled, which is at least some good news. But customers are still pushing back the start of new work and delaying project awards.
Worley noted that recent developments in the region have been positive, including talks around ending the conflict and reopening the Strait of Hormuz.
However, the uncertainty around contract timing still appears to be making investors nervous today.
Currency adds another headwind
In addition to the disappointing update, Worley said the stronger Australian dollar in the second half of FY26 is expected to create another headwind.
Management estimates this will have an impact of about $50 million on FY26 reported underlying EBITA.
That adds another challenge at a time when the company is already dealing with project delays in the Middle East.
For context, Worley reported FY25 underlying EBITA of $823 million.
Full-year result now in focus
The next big test will be Worley's full-year result on 26 August.
Even after today's fall, Worley still has a market capitalisation of around $5.9 billion.
That's not a small business, but the latest update has clearly taken the shine off it.
The result should give the market a better look at how much work has simply been pushed back, and whether margins are being squeezed as well.
Investors will also be watching for any signs that customer activity is starting to improve in the affected regions.
Until then, the stock could remain under close watch. I'd be inclined to sit on the sidelines for now.
