Stellantis makes an unlikely market darling for car industry investors
Carmaker has cleaned up its act and become a good turnaround story since 2020 merger
What do car industry investors get revved up about? Top of the range models, perhaps. Or a seemingly unassailable technological lead, especially in the transition to electric vehicles. Maybe a simple equity story, with a streamlined footprint and a noticeable dearth of political interference.
The strong performance of Stellantis, which reports results on Thursday, suggests that the answer is none of the above. The carmaker, born out of the 2020 merger between Italy’s FCA (Fiat Chrysler) and Groupe PSA (Peugeot Citroën), has raced well ahead. Its stock has risen 60 per cent in the past three years, outperforming rivals Renault, Volkswagen and BMW.
It looks an unlikely market darling. The European business focuses on mass market models. It has not rushed into the EV race with the enthusiasm of some rivals. And it is complex. The French government holds a 6 per cent stake and Italy constantly tugs at the driver’s sleeve to influence its direction.
So why the staggering acceleration? Investors like a good turnaround story. And Stellantis, post merger, has cleaned up its act. Carlos Tavares, who took over the combined group from his post at PSA, has wielded the axe to achieve top of the range operating margins, expected to come in at 12.5 per cent for 2023, according to Citi. That compares with 7.4 per cent at Volkswagen, on S&P Capital IQ estimates.
Being big also means that necessary investments, in new models and R&D, are less of a drag. Capex and R&D will come in at less than 7 per cent of sales, says Philippe Houchois at Jefferies. VW spends about twice that.
A lot could still go wrong. The transition to electric vehicles, although slower than forecast, will shrink its traditional market, not to mention any Chinese competition. Labour costs are rising, not least in North America. Plus, this year global vehicle sales should decline as the surge in pent-up post-coronavirus demand wanes. Profitability will be squeezed.
Even so, Stellantis has a strong balance sheet with some €30bn of net cash expected this year. That helps explain swirling — and denied — rumours of a Renault tie-up. It should generate €11bn of free cash flow after recurring investments, according to Bernstein. Stellantis has more road to run on.
Gapping down
In reaction to earnings/guidance:
In reaction to earnings/guidance:
- WCC -15.1%, TDC -13.4%, HAS -10.3%, INMD -9.4%, SHOP -9.3%, DDOG -8.9%, CDNS -8%, BHF -6.5%, ANET -6.4%, LSCC -6.3%, BLKB -6.2%, ZTS -4.7%, WSO -4.5%, BIIB -4.4%, DNUT -4.3%, JHX -3%, GT -2.8%, HPP -2.6%, MAR -2.2%, MCO -1.8%, CAR -1.3%, MEDP -1.2%, BRX -1.1%
Other news:
- GTHX -42.9% (continuing Phase 3 Trial of Trilaciclib)
- ELTK -15.2% (prices offering of 625K ordinary shares at $16.00 per share)
- MUX -5.6% (production and guidance report)
- BIIB -4.4% (EC authorizes SKYCLARYS for treatment of Friedreich's ataxia)
- GTES -4.3% (stock offering)
- RSKD -2.3% (has undertaken certain actions to reduce operating expenses by initiating a reduction in force that is expected to impact approximately 6% of the Company's workforce)
- STRL -2% (CFO to retire)
Analyst comments:
- PLCE -10.7% (downgraded to Sell from Neutral at B. Riley Securities)
- NAPA -4.9% (downgraded to Underperform from Neutral at BofA Securities)
- NET -3% (downgraded to Hold from Buy at DZ Bank)
- PYPL -1.5% (downgraded to Neutral from Outperform at Daiwa Securities)
- UAL -0.5% (downgraded to Neutral from Buy at Redburn Atlantic)
Gapping up
In reaction to earnings/guidance:
In reaction to earnings/guidance:
- ZI +20.5%, ASPN +15.8%, BRKR +8%, METC +6.9% (guidance), LDOS +4%, WM +3.3%, TAP +2.9%, ROIV +2.6%, AN +2%, INCY +1.8%, SB +1.7%, HWM +1.7%, PFG +1.5%, SAFE +0.9%, BB +0.7% (guidance), TRU +0.7%
Other news:
- KALV +29.2% (results from the phase 3 KONFIDENT clinical trial)
- LIAN +16.3% (completion of strategic review)
- JBLU +15.2% (Carl Icahn discloses 9.91% stake)
- STTK +14.8% (announces a worldwide drug discovery collaboration with Ono Pharmaceutical Co)
- TRIP +11.2% (forming a special committee evaluating proposals)
- EXAI +8.5% (decided to terminate the employment of Andrew Hopkins as the Company's Chief Executive Officer and Principal Executive Officer)
- BMR +8.3% (prices offering of 1714200 ordinary shares at $7.00 per share)
- GPI +3.2% (acquiring RRR Automotive Group; increases dividend)
- KRYS +3% (receives FDA fast track designation for inhaled oncology candidate KB707 to treat solid tumors of the lung)
- AEP +2.5% (entered last night into an agreement with Icahn Capital L.P. and certain of its affiliates under which Hunter C. Gary senior managing director at Icahn Enterprises L.P. and Henry P. Linginfelter retired executive vice president of Southern Company Gas will join AEP's Board of Directors)
- HCC +2.3% (special cash dividend)
Analyst comments:
- GSK +1.3% (upgraded to Buy from Neutral at Citigroup)
Research Calls
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Upgrades:
- Equifax (EFX) upgraded to Outperform from In-line at Evercore ISI; tgt raised to $310
- Fortinet (FTNT) upgraded to Outperform from Neutral at Daiwa Securities; tgt $75
- GlaxoSmithKline (GSK) upgraded to Buy from Neutral at Citigroup
- Philip Morris International (PM) upgraded to Hold from Sell at Societe Generale
- Trimble (TRMB) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $68
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Downgrades:
- 2U (TWOU) downgraded to Hold from Buy at Needham
- AN2 Therapeutics (ANTX) downgraded to Market Perform from Outperform at Leerink Partners; tgt lowered to $7
- Cadence Design (CDNS) downgraded to Neutral from Buy at Rosenblatt; tgt $280
- The Children's Place (PLCE) downgraded to Sell from Neutral at B. Riley Securities; tgt lowered to $4
- Cloudflare (NET) downgraded to Hold from Buy at DZ Bank; tgt $110
- The Duckhorn Portfolio (NAPA) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $8
- PayPal (PYPL) downgraded to Neutral from Outperform at Daiwa Securities; tgt lowered to $62
- Terex (TEX) downgraded to Neutral from Buy at UBS; tgt raised to $62
- United Airlines (UAL) downgraded to Neutral from Buy at Redburn Atlantic; tgt $50
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Others:
- 3D Systems (DDD) initiated with an Overweight at Cantor Fitzgerald; tgt $8.50
- Accuray (ARAY) initiated with a Buy at ROTH MKM; tgt $9
- Agree Realty (ADC) initiated with an Outperform at BMO Capital Markets; tgt $69
- Block (SQ) initiated with a Buy at The Benchmark Company; tgt $89
- CompoSecure (CMPO) initiated with a Buy at The Benchmark Company; tgt $7
- Dynatrace (DT) initiated with an Equal-Weight at Morgan Stanley; tgt $60
- Enovis Corporation (ENOV) initiated with an Overweight at Stephens; tgt $72
- Essential Properties Realty Trust (EPRT) initiated with an Outperform at BMO Capital Markets; tgt $29
- Global Net Lease (GNL) initiated with an Outperform at BMO Capital Markets; tgt $11
- Hilton Grand Vacations (HGV) initiated with a Mkt Outperform at JMP Securities; tgt $55
- IQVIA (IQV) initiated with a Buy at BTIG Research; tgt $285
- Kaspi.kz (KSPI) initiated with an Outperform at Wolfe Research; tgt $130
- Knife River Corp. (KNF) initiated with a Buy at Loop Capital; tgt $81
- Marriott Vacations (VAC) initiated with a Mkt Outperform at JMP Securities; tgt $105
- NextEra Energy Partners (NEP) initiated with an Outperform at Evercore ISI; tgt $43
- PAR Technology (PAR) initiated with a Hold at The Benchmark Company
- Payoneer (PAYO) initiated with a Buy at The Benchmark Company; tgt $7
- Quanta Services (PWR) initiated with an Outperform at Evercore ISI; tgt $237
- Realty Income (O) initiated with a Market Perform at BMO Capital Markets; tgt $57
- Repay Holdings (RPAY) initiated with a Buy at The Benchmark Company; tgt $10
- Shift4 Payments (FOUR) initiated with a Buy at The Benchmark Company; tgt $95
- Stratasys (SSYS) initiated with an Overweight at Cantor Fitzgerald; tgt $24
- Travel + Leisure Co (TNL) initiated with a Mkt Outperform at JMP Securities; tgt $50
Marriott beats by $1.45, misses on revs; guides Q1 EPS below consensus; guides FY24 EPS below consensus (248.54)
- Reports Q4 (Dec) earnings of $3.57 per share, excluding non-recurring items, $1.45 better than the FactSet Consensus of $2.12; revenues rose 2.9% year/year to $6.09 bln vs the $6.2 bln FactSet Consensus.
- Co issues downside guidance for Q1, sees EPS of $2.12-2.19, excluding non-recurring items, vs. $2.30 FactSet Consensus.
- Co issues downside guidance for FY24, sees EPS of $9.18-9.54, excluding non-recurring items, vs. $9.68 FactSet Consensus.
- Co sees Comparable systemwide constant dollar RevPAR growth of 4-5% for Q1 and 3-5% for FY24.
- Fourth quarter 2023 comparable systemwide constant dollar RevPAR increased 7.2 percent worldwide, 3.3 percent in the U.S. & Canada, and 17.4 percent in international markets, compared to the 2022 fourth quarter,
- "In the fourth quarter, worldwide RevPAR rose 7 percent. International RevPAR grew 17 percent, with particular strength in Asia Pacific and Europe.
"In the U.S. & Canada, fourth quarter RevPAR rose over 3 percent. Group revenue at our hotels increased 7 percent compared to the 2022 fourth quarter, driven by solid rate increases. While already significantly above 2019 levels, hotel leisure revenue rose again, up 2 percent. Business transient revenue at our hotels grew 3 percent from the year-ago quarter, with demand from large corporate customers continuing to make gains.
Early premarket gappers
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Gapping up:
- ZI +20.8%, BMR +15.1%, ASPN +14.5%, JBLU +14%, EXAI +11.2%, TRIP +10.8%, METC +6.5%, GPI +3.2%, WM +2.9%, HCC +2.8%, BB +1.8%, SB +1.7%, PFG +1.5%, BIIB +1.2%, SAFE +0.9%, SBLK +0.9%
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Gapping down:
- GTHX -39.1%, ELTK -15.4%, TDC -14.4%, RPTX -10.7%, WCC -9.1%, BHF -7.8%, ANET -7.4%, LSCC -7.3%, MUX -6.9%, CDNS -6.4%, BLKB -5.6%, HPP -5.5%, GTES -4.7%, CRSP -3.4%, JHX -3%, RSKD -2.3%, CAR -1.3%, BRX -1.1%, GT -1%