The European automotive sector appears to be entering a season of skinny cowsaccording to This group of companies has been demonstrating over the course of the year. China has become an obstacle in sales, limiting the companies’ profits, as is the case of luxury clothing brands with their results that the market has not liked. And the analysts, given the moment that the sector is experiencing, earnings estimates have been cut by an average of 26% for the group of automotive companies on the Old Continent for 2024 and 2025, with respect to their expectations at the beginning of the current year. All waiting for the results they present for this last quarter.
In January, the consensus of experts collected by FactSet expected that the group would manage to obtain 66,794 million euros in profits by 2024. But, in The latest revision of the consensus, the forecasts are limited to 47,960 million euros, 28% less. But the prospects for next 2025 are not positive either, since the consensus has limited its forecasts by 24% since the beginning of 2024. The market consensus expects the group to obtain 53,000 million euros, compared to the 69,800 million expected at the beginning. this year.
Companies in this sector are aware of the future for their income and profits, which is why in September the sector experienced a perfect storm of profit warnings, due to the change in forecasts for its Volkswagen, Mercedes-Benz, BMW, Stellantis and Aston Martin business, which brought down the stock market price of this sector. The collapse of sales in China has unexpectedly affected these companies, while the increase in competition with their economical electric vehicles It leaves automobile companies in a complicated situation.
Stellantis is the company that has seen its profit estimates decline the most over the course of the year, Experts cut expected profits for the car brand conglomerate this year by up to half. At the beginning of 2024, experts expected the sum to rise to 16.7 billion euros, which has now fallen by 50%, and they estimate that they will obtain 8.4 billion in profits. And by 2025 the drop is 44%, going from expectations of 16,921 million to 9,394 million.
From Bankinter, after the profit warning carried out by the company at the end of September, they highlight the striking nature of this change in expectations, since “unlike other competitors, Stellantis has almost no exposure to China. Asia represents only 1% of its total sales. That is why this aggressive cutting of guides is especially surprising,” on the other hand, ” “The region where it faces the greatest difficulties is the United States.”
Furthermore, they argue that “Stellantis is the manufacturer that has invested the most resources in the development of affordable electric vehicles, which are the most affected by the growing competition from Chinese manufacturers that arrive in Europe, 35% of their total sales. Without forgetting the slowdown in sales of this type of vehicle due to the lack of an adequate charging network or doubts about the range of the batteries.” From there the entity changed its recommendation from buying directly to selling, given the own and sector weaknesses.
The second firm that achieves the most cuts in its profit estimates in 2024 is Renault, since analysts cut their forecasts for this firm by 34%, from 3,527 million euros to 2,310 million, despite the fact that its results for the last quarter have not been negative. From JP Morgan’s point of view this has been “a good quarter, reporting a 7% increase in revenue.” “The solid order book at the end of September and the upcoming launches should provide a sequential acceleration of activity,” they defend from the analysis house.
In the case of Porsche and Continental, the falls in the forecasts are above 27%. While Volkswagen, Mercedes-Benz and BMW have a decline of around 20%. Luxury firms have found an unexpected obstacle in Asian competition. Despite the confidence they had in their high-end products, these are not enough to compete with the innovations that Chinese electric cars bring to the market.
Ferrari, the only one that increases
Only Ferrari manages to be the exception for the experts and is saved by the cuts in its profit forecasts. Analysts give the brand Prancing Horse a 5% increase in its profit estimatesfrom 1,390 million euros up to 1,460 million. This would be a new record for the company, since it will manage to surpass its historical highs, which it achieved last year: 1,000 million euros in profits. The increase in the prices of its cars and their greater customization are the main reasons that pushed the profits of this company in the first half, which grew by 21% in this period compared to the same quarter of 2023.
On the stock market, a large part of these companies have already seen the consequences of the experts’ predictions in their prices. Within the Stoxx 600, the sector of companies producing automobiles and their parts is the most bearish of the entire continental reference. In the year, this group of companies has fallen by 10.6%, which even the increase of the 48% progress that Ferrari maintains so far in 2024 does not manage to put the group in a positive light.
In the middle of the results season, Renault, Mercedes-Benz and Porsche have already presented their balance sheet for the third quarter of this year, but analysts will be waiting for the companies that still have to be held accountable, these are the following firms: Volkswagen (October 30), Stellantis (October 31), Ferrari (November 5), BMW (November 6) and Continental (November 11).
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