Continental results beat expectations…just about
Financial analysts responded warmly to Continental’s third quarter earnings results, but added a note of caution too, with Morgan Stanley stating: “probably not enough to keep the share moving up.” The investor’s note pointed out that revenues are 5 per cent ahead of the street, EBIT beat consensus by 4 per cent and margin of 9.7 per cent is “just shy of the 9.6 per cent expected.”
The report continued by saying that net debts of 7.3 billion euros were virtually in line with expectation of 7.2 billion euros, which apparently “looks pretty good to” Morgan Stanley who estimated a figure of 7.8 billion euros. Passenger car tyre figures slightly underperformed compared to expectations (down roughly 1 per cent), however truck tyres were significantly up (circa 15 per cent) compared with the market consensus.
On the down side the analysts reported that while the forthcoming outlook was reiterated in third quarter reporting it was done so “with less conviction”. This was said to have been largely due to higher than expected raw material costs rather any kind of slow down in demand. (Although the company increased the raw material headwind guidance by some 100 million euros – 50 million of this from tyre raw materials and 50 million from rare earth inflation). On the contrary, according to Morgan Stanley, Continental’s order book is seen as “still strong” with utilisation reported as being “very good.”
Nevertheless Continental stuck to its sales target of greater than 29.5 billion euros with a roughly 10 per cent margin, but qualified this by stating that the goal is an ambitious one.