In downgrading the stock rating from neutral to underperform, Macquarie Private Wealth said the engineering construction outlook was difficult and the competitive environment was fierce.

While Monadelphous landed a $A680 million structural, mechanical and piping contract for the Ichythys LNG project in February, MPW took note that in the following two months it missed out on the Wheatstone LNG project’s $US625 million ($A674 million) SMP contract to CB&I and Ichthys’ $A615 million of electrical and instrumentation work to Kentz.

With these contracts gone, in a client note MPW said the potential for large scale new awards in the resources and oil and gas scenes appear limited.

While the bank recognised Monadelphous as the “best of breed in terms of reputation and execution” it was concerned about the company’s 2015-16 financial year outlook.

“For some time, the debate has been whether oil and gas awards for Monadelphous would be enough to offset weakness in resources end markets,” MPW said.

“Previously we said “only partly” and forecast a 5% decline in FY15 revenue – we now forecast a 10% drop in FY15 revenue.

“This reflects run-off of iron ore and resources work, some deferral of new work and a very competitive environment which has seen Monadelphous win less of the large available work than previously envisaged.”

In terms of earnings per share, MPW forecasted them to fall 6% for FY2015 and 11% for FY2016.

“The much-feared macro headwinds are upon us and we see a declining earnings outlook for the next few years with risks to the downside.”

MPW issued a 12-month price target of $17.60 for Monadelphous shares on Monday when they last traded at $18.02.