Company Reports

Stellantis has significantly reduced the outlook for its full-year results, now expecting its adjusted operating income margin to be between 5.5% and 7.0% versus prior guidance of double-digit margins. While we believed that its double-digit margin target was too challenging to achieve, we underestimated the extent of the miss. Despite keeping our forecasts from 2025 onward largely unchanged the free cash flow turnaround, so far in 2024 alone, from around EUR 500 million to more than negative EUR 6 billion, is meaningful to our fair value estimates. Thus, we reduce our fair value estimates to EUR 28.50 per share/$31 per ADR from EUR 32 per share/$34.50 per ADR.

Stellantis’ DARE 2030 strategy (launched 2022) has four key goals—become the most profitable automotive original equipment manufacturer globally, lead the industry on carbon neutrality by achieving such by 2038, accelerate the transition to electrification with a battery electric vehicle, or BEV, sales mix target of 100% in the EU and 50% in the US by 2030, and achieve first place on customer experience.

Our views on the predominantly mass-market European automotive original equipment manufacturers Renault, Stellantis, and Volkswagen are unchanged following a transfer of analyst coverage. We maintain our no moat ratings for all three firms with our fair value estimates reflecting significant upside. We increase our fair value estimate for Renault to EUR 85, while our fair value estimates for Stellantis and Volkswagen decrease to EUR 32 and EUR 264, respectively.

Stellantis’ DARE 2030 strategy (launched 2022) has four key goals—become the most profitable automotive original equipment manufacturer globally, lead the industry on carbon neutrality by achieving such by 2038, accelerate the transition to electrification with a battery electric vehicle, or BEV, sales mix target of 100% in the EU and 50% in the US by 2030, and achieve first place on customer experience.

A significant negative swing of EUR 9 billion in free cash flow year over year from EUR 8.7 billion to negative EUR 392 million primarily driven by a 40% decline in Group adjusted operating income has taken the market by surprise, evidenced by the sharp share price decline. While the industry outlook remains challenging, we believe the extent of the profitability decline is temporary as Stellantis prepares for more than 20 new product launches in the second half. Pressure on pricing apparent in the second-quarter numbers, however, reflects concern of increased competition that may have longer lasting effects. We maintain our fair value estimate of EUR 36 per share. While we soften our pricing and volume recovery assumptions somewhat, these changes are offset by some of the cost initiatives underway that will support operating margins over the medium term.

No-moat-rated Stellantis held its investor day on June 13 where management highlighted the company’s positioning in the global vehicle market, with a particular focus on its progress in the electric vehicle market. The event did not produce any incremental news that is material to our valuation, but it did provide clarity on some of the automakers’ key initiatives. We maintain our fair value estimate of EUR 36, with shares trading at a 44% discount to our fair value.

No-moat-rated Stellantis reported first-quarter revenue of EUR 41.7 billion, falling 12% from the prior year. Excluding unfavorable currency, organic revenue was down 9%. Volume was the primary driver of lower revenue for the quarter, which management cited as transitional pains in preparing for new product launches later this year. While we expect volumes to recover in the second half of the year, the declines experienced in the first quarter could be difficult to recoup this year, but we don’t think it raises concerns of a slowdown in end market demand. Additionally, net pricing gains in the quarter partially offset lower volume and mix. The automaker (French-domiciled for accounting purposes) discloses only revenue in the first and third quarters. After reviewing first-quarter results, we’ve decreased our fair value estimate to EUR 36 from EUR 39 due to lower near-term shipments in our forecast.

Stellantis was formed by the merger of Peugeot and Fiat Chrysler, which closed on Jan. 16, 2021. In 2022, chip crisis-affected total unit volume was 6.0 million, while revenue and adjusted operating income were EUR 179.6 billion and EUR 23.3 billion, respectively. Unit sales volume in 2022 makes Stellantis the fifth-largest global automaker behind Toyota at 10.3 million, Volkswagen at 8.0 million, Hyundai/Kia at 6.8 million, and the Renault-Nissan-Mitsubishi alliance at 6.4 million.

Stellantis was formed by the merger of Peugeot and Fiat Chrysler, which closed on Jan. 16, 2021. In 2022, chip crisis-affected total unit volume was 6.0 million, while revenue and adjusted operating income were EUR 179.6 billion and EUR 23.3 billion, respectively. Unit sales volume in 2022 makes Stellantis the fifth-largest global automaker behind Toyota at 10.3 million, Volkswagen at 8.0 million, Hyundai/Kia at 6.8 million, and the Renault-Nissan-Mitsubishi alliance at 6.4 million.

No-moat-rated Stellantis reported full-year revenue of EUR 189.5 billion, up 6% from EUR 179.6 billion reported in the prior year, despite the effects from the United Auto Workers, or UAW, strike. The top line was 0.3% below FactSet consensus. Excluding unfavorable currency, organic revenue rose 9%. Volume and mix contributed 5%, while net pricing contributed a further 4% growth year over year. The automaker (French domiciled for accounting purposes) discloses only revenue in the first and third quarters but full financials for the first half and full year. We are keeping our fair value estimate at EUR 39. Shares of Stellantis currently trade at a compelling 38% discount to our fair value.

No-moat-rated Stellantis reported third-quarter revenue of EUR 45.1 billion, rising 7% from EUR 42.1 billion reported in the prior year, despite the UAW strike. Excluding unfavorable currency, organic revenue rose 14%. The top line beat the FactSet consensus estimate of EUR 43.3 billion by 4%. Stellantis did not give specific figures for the third-quarter impact but did say that the UAW strike resulted in 50,000 lost units for a EUR 3 billion revenue hit and cost less than EUR 750 million in adjusted operating income, cumulatively for September and October. Even though headwinds continue to be substantial, we were impressed that organic revenue growth outpaced volume growth by 3 percentage points as pricing, mix, and volume supported the revenue increase. The automaker (French-domiciled for accounting purposes) discloses only revenue in the first and third quarters.

Stellantis was formed by the merger of Peugeot and Fiat Chrysler, which closed on Jan. 16, 2021. In 2022, chip crisis-affected total unit volume was 6.0 million, while revenue and adjusted operating income were EUR 179.6 billion and EUR 23.3 billion, respectively. Unit sales volume in 2022 makes Stellantis the fifth-largest global automaker behind Toyota at 10.3 million, Volkswagen at 8.0 million, Hyundai/Kia at 6.8 million, and the Renault-Nissan-Mitsubishi alliance at 6.4 million.

No-moat-rated Stellantis announced that it has signed an agreement to acquire a 20% stake in Chinese battery electric vehicle maker Leapmotor for EUR 1.5 billion, subject to customary closing conditions and regulatory approvals. The company will fund the investment from cash on hand. As of June 30, the firm had cash and equivalents of EUR 49.0 billion on its balance sheet. Stellantis will have two seats on Leapmotor’s board and own a controlling 51% interest in a joint venture that will have sales and manufacturing exclusivity outside of China. Management believes regulatory approvals may take up to 10 months and JV shipments could begin in the second-half of 2024. However, management also expects to take delivery of Leapmotor shares before the end of 2023. Acquiring a EUR 1.5 billion stake in Leapmotor had a minimal impact on our EUR 39 fair value estimate. The 5-star-rated shares of Stellantis currently trade at a compelling 55% discount to our fair value.

Stellantis was formed by the merger of Peugeot and Fiat Chrysler, which closed on Jan. 16, 2021. In 2022, chip crisis-affected total unit volume was 6.0 million, while revenue and adjusted operating income were EUR 179.6 billion and EUR 23.3 billion, respectively. Unit sales volume in 2022 makes Stellantis the fifth-largest global automaker behind Toyota at 10.3 million, Volkswagen at 8.0 million, Hyundai/Kia at 6.8 million, and the Renault-Nissan-Mitsubishi alliance at 6.4 million.

The United Auto Workers union announced the night of Oct. 25 that it reached a tentative new 4.5-year contract with Ford. The deal is not effective until ratified by a majority vote of Ford’s approximately 57,000 UAW workers. UAW’s Ford national council will meet in Detroit on Oct. 29 to vote on sending the contract to all members. If they vote to do so, the union that night will host a live video to give members details and release summary literature. There will then be local chapter meetings to discuss the deal and eventually a vote. The union has instructed Ford workers to return to work during the voting process to pressure GM and Stellantis to make a deal. The strike started at all three firms on Sept. 15. We expect the deal to be ratified.

In an Aug. 25 note, we said Stellantis is the most likely automaker to suffer a UAW strike when the union’s contracts with each of the Detroit Three end at 11:59 PM Eastern time on Sept. 14. Since that time, UAW president Shawn Fain has said the union will strike any automaker that it does not have a new agreement with. The sides remain far apart on every key issue, so we now expect a strike against all three firms simultaneously (which has not happened previously), starting on Sept. 15. We see 2023 earnings guidance in jeopardy, but we will likely keep our fair value estimates in place until we know what a new contract looks like. We expect a strike to potentially last several months due to the large gap between the UAW’s desired wage increase and the low-double-digit percentage increases already offered, as well as due to the union wanting to reinstate bygone benefits such as pensions, retiree healthcare, and a 32-hour workweek that would force the automakers to hire more workers than it needs.

On Aug. 25, the United Auto Workers announced 97% member approval of strike authorization against General Motors, Ford, and Stellantis, affecting almost 150,000 hourly workers. This vote does not guarantee a strike will happen; it’s procedural and done every negotiation so the UAW can immediately strike if it chooses to once its contract with each firm expires at 11:59 p.m. Eastern time on Sept. 14. We continue to think a strike against Stellantis is the most likely outcome, but UAW president Shawn Fain has made it clear that a simultaneous strike against all three firms is possible. This has never occurred.

No-moat Stellantis reported first-half revenue of EUR 98.4 billion, up 12% from EUR 88.0 billion last year. The top line beat the FactSet consensus by 2%. The revenue increase was better than the 9% unit volume increase to 3.3 million from 3.0 million a year ago. Currency, the chip shortage, and logistics disruptions contributed negative 1 percentage point to the revenue increase, more than offset by vehicle pricing, volume, and mix that added 13 percentage points. The automaker (French domiciled for accounting purposes) discloses only revenue in the first and third quarters but full financials for the first half and full year. We raised our fair value estimate to EUR 39 from EUR 38 due to the time value of money since our last update. The 5-star-rated shares of Stellantis currently trade at a compelling 55% discount to our new fair value.

Stellantis was formed by the merger of Peugeot and Fiat Chrysler, which closed on Jan. 16, 2021. In 2022, chip crisis-affected total unit volume was 6.0 million, while revenue and adjusted operating income were EUR 179.6 billion and EUR 23.3 billion, respectively. Unit sales volume in 2022 makes Stellantis the fifth-largest global automaker behind Toyota at 10.3 million, Volkswagen at 8.0 million, Hyundai/Kia at 6.8 million, and the Renault-Nissan-Mitsubishi alliance at 6.4 million.

No-moat-rated Stellantis reported first-quarter revenue of EUR 47.2 billion, rising 14% from EUR 41.5 billion reported in the prior year when the chip crunch was much worse. Excluding favorable currency, organic revenue rose 13%. The top line beat the FactSet consensus estimate of EUR 45.9 billion by 3%. Stellantis’ volume, still affected by the chip shortage but to a lesser degree, and favorable mix contributed 7 percentage points to the revenue increase and vehicle pricing added 6 percentage points as average revenue per unit edged 5% higher. The revenue increase outpaced a 7% rise in consolidated unit volume to 1.5 million from 1.4 million last year. The automaker (French domiciled for accounting purposes) discloses only revenue in the first and third quarters.