Analysts up Conti share price target
Financial analysts have expressed a vote of confidence in Continental AG’s present and future financial performance by increasing the price their expect the company’s shares to achieve in the medium term. Recommending a new, higher price target to its investors, Morgan Stanley analysts raised their price target for Continental stock to 90 euros per share, up some 15 euros from the previous target of 75 euros.
According to an investor’s note published 9 March, the upgrade is a result of the market consensus underestimating the company’s “cash generation capabilities and structurally higher-than-market” growth.
“We have increased our 2012 – 2013 earnings per share by 4 per cent following a small fourth quarter beat [outperformance of projections]…We think the market still underestimates the ability of Conti revenue to outpace vehicle production growth in 2012, driven by fast-growing penetration of Conti technologies in the premium and mass car markets.
The company’s perceived ability to produce free cash flow is crucial to this latest assessment. Although capital expenditure is expected to continue to accelerate lighter working capital outflow compared with 2011 is also expected. “Driven by a 25 per cent growth in profits, we estimate free cash flow will surpass 750 million in 2012 (considerably more than company guidance of greater than 600 million) and 1.1 billion in 2013.
Remarking on the current comparatively low entry point of Conti stock, the analysts even hinted at the “possible sale of shares by Schaeffler from late March.” But there were no further suggestions as to how much or what that might mean for Continental.