In an upbeat turn of events, shares of Continental (ETR: CONG) saw a notable surge on Thursday. The impetus behind this rise appears to be recent insights shared during the German tire manufacturer's pre-results call, drawing attention to commendable strides within its automotive division during Q2.
According to its latest communication, Continental indicated that the automotive unit's pricing contributions for the recent three-month period must positively influence overall performance. Analysts from Stifel interpreted these comments as a signal of substantial advancement in the company's price realization efforts. They anticipate the auto division's adjusted earnings before interest and taxes (EBIT) will reach approximately 174 million euros. This figure significantly surpasses the average consensus of 16 million euros posited by Visible Alpha.
Further expanding on a group-wide outlook, Continental is projected to achieve an adjusted EBIT of around 704 million euros, which stands approximately 26% above prevailing expectations. Enhancing this optimistic financial forecast, Continental also announced an aggressive cost-cutting initiative, expected to yield significant savings starting in the second half of 2024. This strategic move should translate into full-year expense reductions ranging from the high double digits to the low triple digits.
Despite these positive developments, Stifel analysts maintain a cautious yet hopeful stance. They believe that due to enhanced pricing and cost-reduction efforts, Continental remains steadfast in its auto division's 3% to 4% full-year margin target. The anticipation of elevated earnings and significant cost savings provides a compelling narrative for investors monitoring the developments at Continental (ETR: CONG).
