Stellantis N.V. (STLA) is scheduled to report its full-year results on February 15. Wall Street expects the company to post higher earnings and revenue over the prior-year period. In this piece, I have discussed why it could be wise to buy the stock now.
For the full year, STLA’s EPS and revenue are expected to increase 17.5% and 7.3% year-over-year to $6.49 and $204.30 billion, respectively. The company reported solid growth in earnings and revenue for the first half of the year.
Commenting on its first-half performance, STLA’s CEO Carlos Tavares said, “Our outstanding performance in the first half of this year supports our long-term sustainability and our ability to achieve the bold ambitions of our Dare Forward 2030 plan. It takes a united effort and open mindset across all our employees to embark on our no-compromise transformation journey while protecting the Company from external challenges.”
“I want to express my gratitude to each and every employee, and I am proud to say that the teams are delivering across multiple dimensions. We are well-positioned for the remainder of 2023 and beyond,” he added.
During the third quarter, which ended September 30, 2023, STLA’s consolidated shipments rose 11% year-over-year to 1,427 thousand units, with Enlarged Europe, Middle East & Africa, North America, and South America reporting year-over-year improvements.
The company purchased €0.50 billion ($0.54 billion) in shares during the third quarter. For nine months ended September 30, 2023, shares repurchased totaled €1.2 billion ($1.29 billion), and the company expects to complete the previously announced €1.5 billion ($1.61 billion) share buyback by the end of 2023.
At the end of the third quarter, STLA maintained its double-digit adjusted operating margin guidance for fiscal 2023. It also expects industrial free cash flows to remain positive. In terms of industry outlook for fiscal 2023, North America is expected to show a growth of 8%, up from the previous guidance of 5%, and Enlarged Europe is expected to grow at 10%, up from 7% expected earlier.
Similarly, Middle East & Africa is now expected to grow at 10% compared to the previously expected 7%. South America’s outlook remains stable, while India & Asia Pacific and China’s outlooks remain unchanged at 5% and 2%, respectively.
During the second half of the year, STLA, Samsung SDI announced Kokomo, Indiana, as the site for its second U.S. StarPlus energy gigafactory. The second StarPlus Energy plant is slated to begin production in early 2027 with an annual capacity of 34 gigawatt hours (GWh). The first StarPlus Energy gigafactory’s construction is already underway to open by the first quarter of 2025 with an annual production capacity of 33 GWh.
Amongst the other developments, STLA announced the opening of its first Battery Technology Center in Turin, Italy. The state-of-the-art center would enhance the company’s capabilities to design, develop, and test battery packs, modules, high-voltage cells and software.
In addition, STLA and Orano announced the signing of an MOU to establish a joint venture for recycling end-of-life EV batteries and scrap from gigafactories in Enlarged Europe and North America, helping strengthen STLA’s position in the EV value chain by securing additional access to cobalt, nickel, and lithium.
Towards the end of November, STLA and CATL signed a strategic MoU for the local supply of lithium iron phosphate (LFP) battery cells and modules to power its European EV production.
STLA’s stock has gained 48.1% over the past six months and 43.9% over the past year to close the last trading session at $23.99.
Here’s what you might want to consider ahead of its upcoming earnings release:
Robust Financials
STLA’s net revenues for six months ended June 30, 2023, increased 11.8% year-over-year to €98.37 billion ($105.69 billion). Its adjusted operating income rose 11% year-over-year to €14.13 billion ($15.18 billion). The company’s net cash from operating activities increased 36.1% year-over-year to €13.39 billion ($14.38 billion).
Also, its net profit rose 37.2% year-over-year to €10.92 billion ($11.73 billion). In addition, its EPS came in at €3.45, representing an increase of 39.7% year-over-year.
Mixed Analyst Estimates
Analysts expect STLA’s EPS for fiscal 2024 to decline 12.3% year-over-year to $5.69. Its revenue for fiscal 2024 is expected to increase 0.4% year-over-year to $205.03 billion.
Discounted Valuation
In terms of forward non-GAAP P/E, STLA’s 3.70x is 76.6% lower than the 15.80x industry average. Its 1.45x forward EV/EBITDA is 85.4% lower than the 9.92x industry average. Likewise, its 1.89x forward EV/EBIT is 86.4% lower than the 13.85x industry average.
Mixed Profitability
In terms of the trailing-12-month EBITDA margin, STLA’s 14.94% is 38% higher than the 10.83% industry average. Likewise, its 27.85% trailing-12-month Return on Common Equity is 150.2% higher than the industry average of 11.13%. Also, its 4.79% trailing-12-month Capex/Sales is 58.8% higher than the industry average of 3.02%.
On the other hand, STLA’s 20.33% trailing-12-month gross profit margin is 42.9% lower than the 35.62% industry average. Its 3.40% trailing-12-month levered FCF margin is 40% lower than the 5.67% industry average.
POWR Ratings Show Promise
STLA has an overall B rating, equating to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. STLA has an A grade for Value, consistent with its discounted valuation. It has a C grade for Quality, in sync with its mixed profitability.
STLA is ranked #10 out of 52 stocks in the Auto & Vehicle Manufacturers industry. Click here to access STLA’s Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
STLA is trading above its 50-day and 200-day moving averages of $22.63 and $19.36, respectively, indicating an uptrend. The company is likely to finish the year on a strong note. STLA’s long-term prospects look promising as it aims to double its net revenues by 2030 and sustain double-digit adjusted operating income margins throughout the decade.
It aims to increase the mix of battery-electric vehicle sales to more than 50% of global revenues in 2030. Furthermore, the company is looking to boost its revenue outside North America and Enlarged Europe to more than 25% of its net revenues by 2030.
Considering these factors and given its robust financials and discounted valuation, it could be wise to buy the stock now.
How Does Stellantis N.V. (STLA) Stack Up Against Its Peers?
While STLA has an overall grade of B, equating to a Buy rating, you may also check out these other A (Strong Buy) or B (Buy)-rated stocks within the Auto & Vehicle Manufacturers industry: Mercedes-Benz Group AG (MBGAF), REV Group, Inc. (REVG), and Suzuki Motor Corporation (SZKMY). To explore more Auto & Vehicle Manufacturers stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
STLA shares were trading at $23.93 per share on Wednesday morning, down $0.06 (-0.25%). Year-to-date, STLA has gained 2.62%, versus a 4.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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