Pirelli in the spotlight after Intermonte upgrade
Analysts expecting 'solid third-quarter earnings' near the top end of guidance and pointing out that the tyre manufacturer is 'outperforming its more solid competitors'
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(Il Sole 24 Ore Radiocor) - On the Italian Stock Exchange (FTSE MIB ) the Pirelli & C stock was in the spotlight. Purchases were boosted by Intermonte's upgrade promoted the stock to 'Outperform' from 'Neutral' and raised the target price to EUR 6.5 from the previous EUR 6, with analysts expecting 'solid third quarter earnings' close to the top end of guidance. In detail, revenues are forecast at EUR 1.72 billion (+1%), Adjusted Ebit at EUR 272 million, +3%, for a margin of 15.7% (+0.3 points). Free cash flow is forecast at EUR 170 million (EUR 167 million in the same period last year) with an almost neutral net working capital effect. In light of these forecasts, analysts expect the company to confirm guidance for the full year "with numbers that will be in the upper part of the range (15.5% margin)". Specifically, they expect 2024 sales of EUR 6.7 billion (+1%), adjusted EBIT of EUR 1.045 billion (+4% with a margin of 15.6%), and free cash flow of EUR 517 million.
Intermonte goes on to emphasise how Pirelli is "overperforming its most solid competitors" (Bridgestone, Michelin, Continental) on key financial parameters. In fact, organic growth "should close at 5%, well above competitors at -3%", the Ebit margin of about 15.3% is about 3 percentage points above average, and free cash flow conversion is solid and low volatility (35%) versus 26% for competitors. However, the analysts point out, Pirelli shares "are trading at a small discount to peers" in terms of Enterprise Value/Ebit and Price earnings (about -5%), "which becomes even greater when considering Free cash flow yield (about 3 percentage points)".
Also underlining the company's good performance was Pirelli's deputy chairman, Marco Tronchetti Provera, who said yesterday on the sidelines of the Assolombarda assembly that "Pirelli continues in a difficult market to do well. Our technologies are establishing themselves all over the world, so we have a good team, good products, and we think we will succeed, even in such a difficult phase, in maintaining our objectives'.
